<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 20, 1998
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
MARYLAND PROPERTY CAPITAL TRUST, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 6798 04-2452367*
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE) IDENTIFICATION NO.)
NCORPORATION OR
ORGANIZATION)
BRUCE A. BEAL, PRESIDENT
177 MILK STREET
BOSTON, MASSACHUSETTS 02109
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OFREGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
BRUCE A. BEAL, PRESIDENT
MARYLAND PROPERTY CAPITAL TRUST, INC.
177 MILK STREET
BOSTON, MASSACHUSETTS 02109
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
WITH A COPY TO:
ETTORE SANTUCCI, P.C. MARK S. BERGMAN, ESQ.
GOODWIN, PROCTER & HOAR LLP PAUL, WEISS, RIFKIND, WHARTON &
EXCHANGE PLACE GARRISON
BOSTON, MASSACHUSETTS 02109-2881 1285 AVENUE OF AMERICAS
(617) 570-1000 NEW YORK, NEW YORK 10019-6064
(212) 373-3000
INVESTING IN THE COMMON STOCK INVOLVES CERTAIN RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 9.
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462 (b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.01.................. 159,737 shares $.2375 $37,937.54 $10.55
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Based upon 9,584,220 shares of beneficial interest of Property Capital
Trust outstanding at the close of business on September 30, 1998, divided
by 60 to adjust for the proposed 1-for-60 reverse stock split to be
effected in connection with the merger of Property Capital Trust into
Maryland Property Capital Trust Inc.
(2) Based upon the average of the bid and asked price of the shares of Property
Capital Trust as of November 16, 1998, estimated solely for the purpose of
calculating the registration fee pursuant to Rule 457 of the Securities Act
of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
*I.R.S. Employer Identification Number of Property Capital Trust, the
predecessor to the Registrant prior to the merger described herein.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
-----------------------------------------
PROPERTY CAPITAL TRUST
-----------------------------------------
177 Milk Street, Suite 14B, Boston, Massachusetts 02109
To the Shareholders of Property Capital Trust:
You are cordially invited to a Special Meeting of Shareholders of Property
Capital Trust (the "Trust") at the offices of Goodwin, Procter & Hoar LLP,
Exchange Place, 2nd Floor, Boston, Massachusetts on at 9:00 a.m.
(Eastern Standard Time).
At this Special Meeting, you will be asked to consider and vote upon a
proposal to approve a merger of the Trust into Maryland Property Capital Trust,
Inc., a Maryland corporation and a wholly-owned subsidiary of the Trust (the
"Corporation"). The terms of the merger are described in detail in the
accompanying Proxy Statement/Prospectus and a copy of the Merger Agreement by
and between the Trust and the Corporation, as amended, is attached to the Proxy
Statement/Prospectus. Upon consummation of the merger, you will receive:
(i) one-sixtieth of a share of common stock of the Corporation (the
"Corporation Common Stock") for each share of the Trust you own, with one
share of Corporation Common Stock to be issued in exchange for any
fractional interest of Corporation Common Stock equal to or greater than
.5; and
(ii) a Contingent Payment Right (as defined in the Merger Agreement).
In addition, immediately prior to the consummation of the Merger, the
Trustees intend to redeem the rights issued and outstanding under the Trust's
Shareholder Rights Plan at the redemption price of $.01 per share and declare a
special dividend of approximately $.22 per share, representing substantially
all of the assets held by the Trust as of such time.
The merger is the final step in the consummation of the Trust's business
plan, ratified by Shareholders at the 1995 Annual Meeting, to dispose of the
Trust's assets in an orderly fashion and distribute the net proceeds to
Shareholders. With the special dividend to be declared immediately before the
consummation of the merger, you will have received special dividends pursuant
to the business plan in the amount of approximately $13.87 per share, plus $.01
per share upon redemption of the rights outstanding under the Trust's
Shareholder Rights Plan. These special dividends constitute the proceeds from
the sale of all of the assets of the Trust after payment of indebtedness, other
liabilities and expenses.
The primary purpose of the Trust in merging with the Corporation is to enable
the Trust to pay the final special dividend and the rights redemption price
within the next several months. If the Shareholders do not approve the merger,
the Trust will not make such distribution for at least a year or two, and such
distribution will be reduced by the expenses (net of short-term investment
income) of maintaining a liquidating trust to provide for contingent
liabilities. The Corporation Common Stock which you will receive in the merger
will not have significant, if any, present value. This is because such stock
represents an interest in a real estate asset being contributed by third
parties in which the Trust had no previous interest and for which the Trust has
paid no consideration. It is possible that such stock may have some greater
value in the future if the Corporation or its operating partnership acquires
additional assets, but no assurance can be given that this will occur.
Enclosed with this letter is a Notice of Special Meeting, Proxy
Statement/Prospectus (with attachments), proxy card and return envelope. Please
read the notice and the Proxy Statement/Prospectus and consider this
information carefully.
The Board of Trustees has determined that the merger is fair and in the best
interests of the Trust and its Shareholders and has approved the merger and the
Merger Agreement. The Board of Trustees recommends unanimously that you vote
"FOR" approval and adoption of the Merger and the Merger Agreement.
<PAGE>
Your vote is important. We hope you will attend the meeting in person, but we
urge you, in any event, to complete the enclosed proxy card and promptly return
it in the envelope provided. If you attend the Special Meeting, you may vote
your shares of the Trust in person, even if you have previously submitted a
proxy card. APPROVAL OF THE MERGER REQUIRES THE AFFIRMATIVE VOTE OF TWO-THIRDS
OF THE OUTSTANDING SHARES OF THE TRUST AS OF THE RECORD DATE AND, AS A RESULT,
YOUR FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER.
SHARES HELD IN STREET NAME WILL NOT BE VOTED UNLESS YOU GIVE YOUR BROKER VOTING
INSTRUCTIONS.
Sincerely,
JOHN A. CERVIERI JR.
Managing Trustee
<PAGE>
-----------------------------------------
PROPERTY CAPITAL TRUST
-----------------------------------------
177 Milk Street, Suite 14B, Boston, Massachusetts 02109
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of
Property Capital Trust:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Property Capital Trust (the "Trust"), will be held at the offices
of Goodwin, Procter & Hoar LLP, Exchange Place, 2nd Floor, Boston,
Massachusetts on at 9:00 a.m. (Eastern Standard Time) for the
following purposes:
1. To consider and vote upon a proposal to approve and adopt the Agreement
and Plan of Merger, dated as of June 18, 1998, as amended (the "Merger
Agreement"), between the Trust and Maryland Property Capital Trust, Inc., a
wholly-owned subsidiary of the Trust (the "Corporation"), which provides, among
other things, for (i) the merger of the Trust into the Corporation; (ii) the
issuance of approximately 159,737 shares of Corporation Common Stock in
exchange for all of the Trust's shares, with one share of Corporation Common
Stock to be exchanged for any fractional interest of Corporation Common Stock
equal to or greater than .5; and (iii) a Contingent Payment Right (as defined
in the Merger Agreement). In addition, immediately prior to the consummation of
the merger, the Trustees intend to redeem the rights issued and outstanding
under the Trust's Shareholder Rights Plan at the redemption price of $.01 per
share and declare a special dividend of approximately $.22 per share,
representing substantially all of the assets held by the Trust as of such time.
2. To transact such other business as may properly be brought before the
Special Meeting or at any adjournments or postponements thereof.
The accompanying Proxy Statement/Prospectus describes the Merger Agreement,
the proposed merger and the actions to be taken in connection with the merger.
Consummation of the merger is subject to a number of conditions and other
terms, including approval and adoption of the Merger Agreement by the
affirmative vote of the holders of at least two-thirds of the shares of the
Trust outstanding as of the record date. All of the conditions and other terms
are summarized, along with certain financial and other information, in the
Proxy Statement/Prospectus. In addition, a series of related transactions which
will occur immediately following consummation of the merger are summarized in
the accompanying Proxy Statement/Prospectus.
The Board of Trustees has fixed the close of business on , 1998 as
the record date for the Special Meeting. Only Shareholders of record at the
close of business on the record date are entitled to notice of, and to vote at,
the Special Meeting. At the record date, there were [ ] shares issued
and outstanding.
THE BOARD OF TRUSTEES HAS DETERMINED THAT THE MERGER IS FAIR AND IN THE BEST
INTERESTS OF THE TRUST AND ITS SHAREHOLDERS AND HAS APPROVED THE MERGER AND THE
MERGER AGREEMENT. THE BOARD OF TRUSTEES RECOMMENDS UNANIMOUSLY THAT YOU VOTE
"FOR" APPROVAL AND ADOPTION OF THE MERGER AND THE MERGER AGREEMENT.
YOUR VOTE IS IMPORTANT. PLEASE RETURN YOUR PROXY CARD PROMPTLY.
<PAGE>
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD IN THE ENCLOSED PREPAID ENVELOPE WITHOUT DELAY.
YOU MAY ATTEND THE SPECIAL MEETING AND VOTE PERSONALLY ON EACH MATTER BROUGHT
BEFORE THE SPECIAL MEETING AND ANY PROXY GIVEN BY YOU MAY BE REVOKED AT ANY
TIME BEFORE IT IS EXERCISED.
PLEASE DO NOT SEND ANY SHARE CERTIFICATES AT THIS TIME.
By Order of the Trustees
WALTER F. LEINHARDT
Secretary
Boston, Massachusetts
--IMPORTANT--
IF YOUR SHARES ARE HELD IN "STREET NAME," ONLY YOUR BANK OR BROKER CAN VOTE
YOUR SHARES. PLEASE CONTACT THE PERSON RESPONSIBLE FOR YOUR ACCOUNT AND
INSTRUCT HIM OR HER TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD
AS SOON AS POSSIBLE. WITHOUT SUCH INSTRUCTIONS, YOUR SHARES WILL NOT BE VOTED.
If you have any questions or need further assistance in voting your shares,
please call Innisfree M&A Incorporated, which is assisting the Trust in
soliciting proxies, at 1-888-750-5834.
<PAGE>
Subject to Completion Dated November 20, 1998
----------------
PROXY STATEMENT/PROSPECTUS
----------------
PROPERTY CAPITAL TRUST
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
MARYLAND PROPERTY CAPITAL TRUST, INC.
PROSPECTUS
COMMON STOCK, PAR VALUE $.01 PER SHARE
This Proxy Statement/Prospectus (together with the Roll-up Transaction
Individual Supplement attached as Annex B), the accompanying Notice of Special
Meeting and Proxy Card are being furnished to you in connection with the
solicitation of proxies by the Board of Trustees of Property Capital Trust
("the Trust") for use at the Special Meeting of Shareholders to be held at the
offices of Goodwin, Procter & Hoar LLP, Exchange Place, 2nd Floor, Boston,
Massachusetts on at 9:00 a.m. (Eastern Standard Time) and at
any adjournments or postponements thereof. This Proxy Statement/Prospectus, the
accompanying Notice of Special Meeting and Proxy Card are first being mailed to
the Shareholders of record on .
At the Special Meeting, you will consider and vote upon a proposal to approve
and adopt the Agreement and Plan of Merger, dated as of June 18, 1998, as
amended (the "Merger Agreement"), between the Trust and Maryland Property
Capital Trust, Inc., a wholly-owned subsidiary of the Trust (the
"Corporation"), pursuant to which the Trust will be merged into the Corporation
(the "Merger"). A copy of the Merger Agreement is attached hereto as Annex A
and is incorporated herein by reference. You should be aware that the summaries
of portions of the Merger Agreement set forth in this Proxy
Statement/Prospectus do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, the text of the Merger Agreement.
Further, the summaries of the related transactions herein do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the text of the agreements which provide for such transactions.
Upon consummation of the Merger, you will receive: (i) for each share of the
Trust (the "Shares"), one-sixtieth of a share of Common Stock of the
Corporation (the "Corporation Common Stock"); (ii) one share of Corporation
Common Stock in exchange for any fractional interest of Corporation Common
Stock equal to or greater than .5; and (iii) a Contingent Payment Right (as
defined in the Merger Agreement). In addition, immediately prior to the
consummation of the Merger, the Trustees intend to redeem the rights issued and
outstanding under the Trust's Shareholder Rights Plan at the redemption price
of $.01 per share and declare a special dividend of approximately $.22 per
Share, representing substantially all of the assets held by the Trust as of
such time.
The Merger is the final step in the consummation of the Trust's business
plan, ratified by Shareholders at the 1995 Annual Meeting, to dispose of the
Trust's assets in an orderly fashion and distribute the net proceeds to
Shareholders. With the special dividend to be declared immediately before the
consummation of the Merger, you will have received special dividends pursuant
to the business plan in the amount of approximately $13.87 per Share, plus $.01
per Share upon redemption of the rights outstanding under the Trust's
Shareholders Rights Plan. Your continuing interest in the Corporation through
ownership of Corporation Common Stock represents a highly contingent interest
in the future business of the Corporation and will have value only if and when
the Corporation acquires new assets. You should be aware that the value of the
Corporation Common Stock you will receive in the Merger is essentially zero.
Such value may grow in the future if and when the Corporation is
<PAGE>
successful in becoming a diversified real estate investment trust. However,
there is no assurance that such growth will occur.
Consummation of the Merger is conditioned upon, among other things, approval
and adoption of the Merger Agreement by the vote of holders of at least two-
thirds of the Shares outstanding as of the record date. There can be no
assurance that the conditions to the Merger will be satisfied or, where
permissible, waived or that the Merger will be consummated.
This Proxy Statement/Prospectus also constitutes a prospectus of the
Corporation relating to approximately 159,737 shares of Corporation Common
Stock, plus such additional shares of the Corporation Common Stock in lieu of
fractional shares, that the Corporation will offer and issue to the
Shareholders of record upon the consummation of the Merger.
A series of related transactions (the "Related Transactions") which will
occur immediately following consummation of the Merger also are described
herein. You WILL NOT be asked to vote upon the Related Transactions. A
description of such transactions is included to provide you with all
information which may be relevant to an informed voting decision.
You are not entitled to dissenters' rights of appraisal or other dissenters'
rights under Massachusetts or Maryland law with respect to the Merger or the
other transactions described herein.
THE TRUSTEES, AFTER CAREFUL CONSIDERATION, UNANIMOUSLY HAVE DETERMINED THAT
THE MERGER IS FAIR AND IN THE BEST INTERESTS OF THE TRUST AND ITS SHAREHOLDERS
AND APPROVED THE MERGER AND THE MERGER AGREEMENT. THE TRUSTEES UNANIMOUSLY
RECOMMEND THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE MERGER AND THE
MERGER AGREEMENT.
In reaching their determination, the Trustees gave consideration to a number
of factors described in this Proxy Statement/Prospectus. Please read and
consider the information contained in this Proxy Statement/Prospectus and the
Annex hereto carefully.
This Proxy Statement/Prospectus and the Proxy Card are being first mailed to
you on or about . You should specify your choices on the accompanying
Proxy Card. If no specific instructions are given with regard to the matter to
be voted upon, your Shares represented by a signed Proxy Card will be voted
"FOR" the proposal listed on the Proxy Card. You may revoke your Proxy Card at
any time prior to its exercise.
If your Shares are in "street name" they will not be voted unless you give
your bank or broker voting instructions. Because a vote of two-thirds of the
Shares is required for approval of the Merger, Shares that you fail to vote
have the same effect as Shares voted against the Merger.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Proxy Statement/Prospectus is November 20, 1998
----------------
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: How will I benefit from the Merger?
A: The Trust has disposed of all of its real estate investments. If there were
no Merger, the Trust would organize a liquidating trust and transfer all or a
substantial portion of its remaining assets (cash and cash equivalents) to the
liquidating trust to hold in order to meet contingent liabilities of the Trust.
After a period of one to three years, the liquidating trust would distribute
the assets held by it, net of expenses of operating the liquidating trust and
payments, if any, made in respect of contingent liabilities of the Trust, to
the former Shareholders of the Trust. If the Merger goes forward, shortly after
the consummation of the Merger, the Trust will distribute all of its assets to
its Shareholders (approximately $.23 per Share, including the redemption price
for the outstanding rights). Such distribution will not be reduced for
operating expenses of the liquidating trust because if the Merger proceeds,
none will be created. Also, no provision need be made for the Trust's
contingent liabilities because the Corporation will assume such liabilities.
You will also receive stock of the Corporation if the Merger goes forward, but
such stock, because of certain preferred interests that are being created, will
initially have little or no value. This is because such stock represents an
interest in a real estate asset that third parties are contributing in which
the Trust had no previous interest and for which the Trust paid no
consideration. It is possible that such stock may have some greater value in
the future if the Corporation or the Operating Partnership acquires additional
assets, but no assurances can be given that this will occur.
Q: What will I receive in the Merger?
A: Shortly after consummation of the Merger, you will receive a special
dividend and the rights redemption price from the Trust in an aggregate amount
of approximately $.23 per Share. In addition, you will receive one-sixtieth of
a share of Corporation Common Stock for each Share of the Trust that you own,
with one share of Corporation Common Stock to be issued in exchange for any
fractional interest of Corporation Common Stock equal to or greater than .5.
Finally, you will be entitled to the Contingent Payment Right, which represents
your proportionate share of any additional condemnation award that the court
may hereafter grant in connection with a prior taking of one of the Trust's
real estate investments. The Trust does not expect that such additional award
will exceed $.10 per Share, and it could be zero.
Q: What will the assets of the Corporation be after the Merger?
A: The Corporation will not own directly any real estate. Its only asset will
be an approximate 33.3% common partnership interest in the Operating
Partnership (which includes a 1% general partnership interest). The Operating
Partnership will own as its sole real estate investment a 17,250 square foot
office and research and development building.
Q: What distributions will I receive on my Corporation Common Stock after the
Merger?
A: Because certain of the limited partners of the Operating Partnership will be
entitled to a preferred distribution, the Corporation does not expect to
receive any distributions from the Operating Partnership for the foreseeable
future. Future distributions to the Corporation by the Operating Partnership
are entirely dependent on whether and when the Operating Partnership acquires
additional assets or improves the performance of the existing property. As a
result, you may not receive any distributions on your Corporation Common Stock
at all, and your Corporation Common Stock may continue to have little or no
value.
Q: When and where is the Special Meeting?
A: The Special Meeting will take place at the offices of Goodwin, Procter &
Hoar LLP, Exchange Place, 2nd Floor, Boston, Massachusetts on ,
at 9:00 a.m. (Eastern Standard Time).
Q: Other than the vote on the Merger, what else will happen at the Special
Meeting?
A: Nothing is scheduled.
Q: What do I need to do now?
A: Just mail your completed, dated and signed proxy card in the enclosed return
envelope as soon as possible, so that your Shares may be represented and voted
at the Special Meeting. The Trustees
<PAGE>
unanimously recommend voting in favor of the Merger. If your Shares are held
in "street name," your bank or broker may vote your Shares. Please contact the
person responsible for your account and instruct him or her to complete, sign,
date and return the proxy card. Without such instructions, your Shares will
not be voted.
Q: What do I do if I want to change my vote?
A: Just send in a later-dated, signed proxy card to the Trust's Secretary so
that it arrives before the Special Meeting, or attend the Special Meeting and
vote in person.
Q: Should I send in my Share certificates now?
A: Do not send in your Share certificates now. After the Merger is completed,
we will send you written instructions for exchanging your Share certificates.
Q: When will the Merger be completed?
A: If the Trust obtains the requisite Shareholder approval, the Corporation
and the Trust hope to complete the Merger shortly after the Special Meeting.
Q: What are the major risks involved in the Merger?
A: As the Corporation Common Stock that you will receive as a result of the
Merger will not have significant, if any, value for the foreseeable future,
there are few practical risks to the Merger. Further, these risks will be
meaningful to you only if, in the future, the Corporation Common Stock you
receive acquires some additional value due to the diversification of the
Corporation's portfolio. No assurance can be given as to whether or when your
Corporation Common Stock will have any value.
Q: What are the federal income tax consequences to the Shareholders caused by
the Merger?
A: The federal income tax consequences are uncertain. The Merger may qualify
as a tax-free reorganization, in which case, although it is not free from
doubt, the Contingent Payment Right should be treated separately as a
distribution by the Trust. If the Contingent Payment Right is not treated
separately, you will recognize gain (which may be taxed as ordinary income),
if any, but not loss, on the exchange to the extent of the value of the
Contingent Payment Right, which value is speculative. If the Merger does not
qualify as a tax-free reorganization, you will recognize gain or loss equal to
the difference, if any, between your adjusted tax basis in your Shares of the
Trust and the value of (i) the Corporation Common Stock received in exchange
therefor and (ii) the Contingent Payment Right you receive. The Corporation
Common Stock will not have significant, if any, present value and the value of
the Contingent Payment Right is speculative.
<PAGE>
AVAILABLE INFORMATION
The Trust files annual, quarterly and special reports, proxy statements and
other information electronically with the Commission. You may read and copy any
of these reports, statements or other information that the Trust files with the
Commission at the Commission's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the following Regional Offices of the Commission:
Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Please
call the Commission at 1-800-SEC-0330 for further information on the Public
Reference Room. You may also obtain copies of these reports, statements and
other information at the Commission's Web Site at http://www.sec.gov.
All information contained in this Proxy Statement/Prospectus with respect to
the Corporation has been supplied by the Corporation, and all information with
respect to the Trust has been supplied by the Trust.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement/Prospectus is part of a registration statement on Form
S-4 filed with the Commission covering the shares of Corporation Common Stock
the Corporation will issue in connection with the Merger. This Proxy
Statement/Prospectus also constitutes the proxy statement of the Trust for the
Special Meeting.
This Proxy Statement/Prospectus does not repeat important information that
you can find in the Trust's reports, statements or other documents the Trust
files with the Commission. It also does not contain certain information,
exhibits and undertakings contained in the Corporation's registration
statement. The Commission allows the Trust to "incorporate by reference" the
information the Trust files with them. This means that the Trust can disclose
important information to you by referring you to other documents that are
legally considered part of this Proxy Statement/Prospectus, and later
information the Trust files with the Commission will automatically update and
supersede the information in this Proxy Statement/Prospectus. The Trust
incorporates by reference all documents and reports subsequently filed by the
Trust pursuant to Section 13(a), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act").
The Trust will provide you without charge, upon your written or oral request,
a copy of any documents incorporated by reference (but not exhibits filed with
these documents unless those exhibits are specifically referred to). Please
direct your requests for such documents to: Property Capital Trust, 177 Milk
Street, Suite 14B, Boston, MA 02109, Attention: Robert M. Melzer, President
(telephone: (617) 482-4081). The Trust will deliver such documents by first
class mail or other equally prompt means. TO ENSURE TIMELY DELIVERY OF SUCH
DOCUMENTS, YOU SHOULD MAKE REQUESTS FOR SUCH DOCUMENTS NO LATER THAN
, 1998.
You should rely only on the information incorporated by reference or
contained in this Proxy Statement/Prospectus or any supplement. Neither the
Trust nor the Corporation has authorized anyone else to provide you with
different or additional information. Neither the Trust nor the Corporation is
making an offer of the Corporation Common Stock in any state where the offer is
not permitted. You should not assume that the information in this Proxy
Statement/Prospectus or any supplement is accurate as of any date other than
the date on the front of those documents.
<PAGE>
NOTE ON FORWARD LOOKING STATEMENTS
This Proxy Statement/Prospectus contains and may incorporate by reference
certain forward-looking statements with respect to, among other things,
information concerning possible or assumed future results of operations of the
Trust, the Corporation or the Operating Partnership (as hereinafter defined),
the reasons for the Merger and statements about the expected impact of the
Merger on the Trust and the Corporation. When we use the words "anticipate,"
"assume," "believe," "estimate," "expect," "intend" or other similar
expressions in this Proxy Statement/Prospectus, they are generally intended to
identify forward-looking statements. You should not rely on forward-looking
statements because they involve both known and unknown risks, uncertainties and
other factors that may cause our actual results, performance or achievements to
be materially different from any outcomes expressed or implied by such forward-
looking statements. For those statements, we claim the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995. The following factors, among others, could
affect our future results if we decide to expand and diversify the
Corporation's portfolio, as to which there is no assurance, and could cause
those results to differ materially from those expressed in the forward-looking
statements:
. general economic and business conditions;
. competition;
. changes in business strategy or development plans;
. availability, terms and deployment of capital;
. business abilities and judgment of personnel;
. changes in, or failure to comply with government regulations;
. the costs and other effects of legal and administrative proceedings; and
. other risks and uncertainties affecting us and our competitors
(including those that may be taken in contemplation of the Merger), all
of which are difficult or impossible to predict accurately and many of
which are beyond our control.
Neither the Trust nor the Corporation undertakes any obligation to update any
forward-looking statements.
<PAGE>
TABLE OF CONTENTS
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PAGE
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SUMMARY INFORMATION....................................................... 1
The Parties............................................................. 1
The Special Meeting..................................................... 2
The Merger.............................................................. 2
The Merger Agreement.................................................... 3
Conditions to the Merger................................................ 3
Termination............................................................. 3
Fees and Expenses....................................................... 3
Contingent Payment Right................................................ 4
Cash Consideration...................................................... 4
The Related Transactions................................................ 4
Interests of Certain Persons in the Merger.............................. 5
Listing of Shares....................................................... 5
Regulatory Approvals.................................................... 5
Federal Income Tax Consequences to Shareholders......................... 5
Accounting Treatment.................................................... 6
Dissenters' Rights...................................................... 6
Comparison of Shareholder Rights........................................ 6
Description of the Capital Stock of the Corporation..................... 6
Market Prices and Cash Dividends Information for the Trust.............. 6
Selected Financial Data................................................. 7
RISK FACTORS.............................................................. 9
Interests of Certain Directors and Officers of the Corporation and
Trustees of the Trust in the Merger.................................... 9
Distributions Dependent Upon Growth..................................... 9
Risk of Ownership in Becoming Stockholders of the Corporation........... 9
Limited Liquidity....................................................... 10
Real Estate Investment Risks............................................ 10
Comparison of Stockholder Rights........................................ 13
Substantial Expenses and Payments if the Merger or the Related
Transactions Fail to Occur............................................. 14
Federal Income Tax Risks--Failure to Qualify as a Real Estate Investment
Trust.................................................................. 14
Dependence on The Beal Companies LLP.................................... 15
Lack of Operating History as a REIT..................................... 15
THE SPECIAL MEETING....................................................... 16
Purpose of the Special Meeting; Date, Time and Place.................... 16
Record Date; Solicitation of Proxies.................................... 16
Vote Required........................................................... 16
Proxies................................................................. 16
THE MERGER................................................................ 18
Information Regarding the Parties....................................... 18
The Merger Consideration................................................ 19
Contingent Payment Right................................................ 19
Cash Consideration...................................................... 19
Recommendation of the Board of Trustees................................. 20
Background of and Reasons for the Merger................................ 20
Interests of Certain Persons in the Merger.............................. 21
</TABLE>
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<TABLE>
<S> <C>
Listing of Shares........................................................ 22
Regulatory Approvals..................................................... 22
Related Transactions..................................................... 22
Accounting Treatment..................................................... 23
Dissenters' Rights....................................................... 23
Certain Effects of the Merger............................................ 23
THE MERGER AGREEMENT....................................................... 24
Consideration to be Paid in the Merger................................... 24
Effective Time........................................................... 24
General Conditions to the Merger......................................... 24
Termination.............................................................. 25
Fees and Expenses........................................................ 25
Exculpation.............................................................. 26
Indemnification.......................................................... 26
Articles of Incorporation and Bylaws..................................... 27
Management after the Merger.............................................. 27
THE CORPORATION............................................................ 28
Description of Business of the Corporation............................... 28
Business and Growth Strategy............................................. 28
Board of Directors....................................................... 29
Officers................................................................. 30
Executive Compensation................................................... 30
Description of Property.................................................. 30
Legal Proceedings........................................................ 31
Quantitative and Qualitative Disclosures about Market Risk............... 31
The Operating Partnership................................................ 31
The Partnership Agreement of the Operating Partnership................... 33
FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS............................ 34
General.................................................................. 34
Special Tax Considerations for Foreign Shareholders...................... 35
Information Reporting Requirements and Backup Withholding Tax............ 35
COMPARISON OF SHAREHOLDERS' RIGHTS......................................... 37
Board of Trustees and Board of Directors................................. 37
Distribution to Shareholders............................................. 38
Shareholders' Meetings................................................... 38
Shareholder Approval of Certain Actions.................................. 38
Limitations on Dissenters' Appraisal Rights.............................. 39
Limitation of Liability and Indemnification of Directors Compared to
Trustees................................................................ 40
Certain Provisions of Maryland Law....................................... 40
DESCRIPTION OF THE CAPITAL STOCK OF THE CORPORATION........................ 43
General.................................................................. 43
Description of Preferred Stock........................................... 43
Description of Common Stock.............................................. 43
Description of Excess Stock.............................................. 44
Restrictions on Ownership................................................ 44
Restrictions on Transfers of Capital Stock............................... 44
Anti-Takeover Provisions................................................. 45
</TABLE>
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<TABLE>
<S> <C>
PRO FORMA FINANCIALS FOR MARYLAND PROPERTY CAPITAL TRUST, INC............. 46
SELECTED FINANCIAL INFORMATION--THE TRUST................................. 52
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS--THE TRUST.................................................... 53
SELECTED FINANCIAL INFORMATION--FYA....................................... 61
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS--FYA........ 62
SELECTED COMPARATIVE PER SHARE DATA....................................... 64
MARKET PRICES AND CASH DIVIDENDS INFORMATION.............................. 65
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............ 66
LEGAL MATTERS............................................................. 67
EXPERTS................................................................... 67
OTHER MATTERS............................................................. 67
Framingham York Associates Limited Partnership Financial Statements....... F-1
Annex A--Agreement and Plan of Merger, dated June 18, 1998, as amended, by
and between Property Capital Trust and Maryland Property Capital Trust,
Inc...................................................................... A-1
Annex B--Roll-up Transaction Individual Supplement........................ B-1
</TABLE>
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SUMMARY INFORMATION
The following is a brief summary of certain information contained in this
Proxy Statement/Prospectus and may not contain all of the information that is
important to you. To better understand the terms of the merger between the
Trust and the Corporation (the "Merger"), you should read carefully the entire
Proxy Statement/Prospectus, the attached annexes and the documents incorporated
herein by reference. This Proxy Statement/Prospectus contains certain "forward-
looking statements" concerning the benefits expected as a result of the Merger
and the future financial performance of the Corporation and the Operating
Partnership. See "NOTE ON FORWARD LOOKING STATEMENTS."
THE PARTIES
Property Capital Trust
177 Milk Street, Suite 14B
Boston, MA 02109
(617) 482-4081
The Trust is a real estate investment trust or "REIT." The Trust currently
does not own any real estate assets because, pursuant to the business plan
adopted by the Trustees and ratified by the Shareholders, the Trust has
disposed of all of its real estate investments. Therefore, immediately prior to
the Merger the only assets of the Trust will be (i) approximately $.23 per
Share in cash which the Trustees intend to distribute to you in the form of a
special dividend and payment of the rights redemption price shortly after the
consummation of the Merger and (ii) any Contingent Payment that the Trust
subsequently may collect and which you will be entitled to receive, in
proportion to your current equity ownership of the Trust, under the terms of
the Merger Agreement.
Maryland Property Capital Trust, Inc.
177 Milk Street
Boston, MA 02109
(617) 451-2100
The Corporation is a wholly-owned subsidiary of the Trust. Pursuant to the
Merger Agreement, the Trust will merge into the Corporation. Following
completion of the Merger, the Corporation will change its name to "Property
Capital Trust, Inc." and will continue to elect to be treated as a REIT.
At the present time, the Corporation's sole asset is its general partnership
interest in Property Capital Trust Limited Partnership ("PCT LP"). Upon
completion of the Related Transactions (as described herein), the Corporation's
sole asset will be its approximate 1% general partnership interest and 32.3%
common limited partnership interest in the Operating Partnership. This 33.3%
common partnership interest will be junior to certain preferred limited
partnership interests in the Operating Partnership, which, at this time and for
the foreseeable future, makes the common partnership interest of the
Corporation in the Operating Partnership of little or no value.
Framingham York Associates Limited Partnership
177 Milk Street
Boston, MA 02109
(617) 451-2100
As part of the Related Transactions, Framingham York Associates Limited
Partnership ("FYA") will purchase approximately 319,489 shares of newly issued
common stock of the Corporation (the "Corporation Common Stock") for
approximately $1 million in cash, all of which the Corporation will contribute
to the Operating Partnership and will use to pay transaction costs. Following
such purchase, PCT LP will merge into FYA, which will then become the Operating
Partnership. See "THE MERGER--Related Transactions."
FYA holds approximately 1.1 acres of land Rimproved by a one story combined
office and research and development building of 17,250 square feet of rentable
space.
Property Capital Trust Limited Partnership
177 Milk Street
Boston, MA 02109
(617) 451-2000
PCT LP is a limited partnership that has no assets at the present time. As
part of the Related Transactions, PCT LP will merge into FYA.
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Pursuant to such merger, PCT LP will cease to exist and FYA will be the
surviving entity. FYA, as the surviving entity, will change its name to
"Property Capital Trust Limited Partnership" and become the Operating
Partnership. See "THE MERGER--Related Transactions."
THE SPECIAL MEETING
(see pages 16-17)
Purpose of the Special Meeting; Date, Time and Place. The Special Meeting
will be held at the offices of Goodwin, Procter & Hoar LLP, Exchange Place, 2nd
Floor, Boston, Massachusetts on at 9:00 a.m. (Eastern
Standard Time). At the Special Meeting, you will consider and vote upon a
proposal to approve and adopt the Merger and the Merger Agreement (a copy of
which is attached hereto as Annex A).
The Related Transactions will occur immediately following the Merger and are
summarized in this Proxy Statement/Prospectus. You will not be asked to vote on
these Related Transactions at the Special Meeting.
Vote Required; Voting Procedures; Record Date. The Trustees fixed the close
of business on , 1998 as the record date for the determination of
Shareholders of the Trust entitled to notice of, and to vote at, the Special
Meeting. On the record date, [ ] Shares were issued and outstanding,
each of which will be entitled to one vote on each matter to be acted upon at
the Special Meeting.
The favorable vote of holders of two-thirds of the Shares outstanding as of
the record date is required to approve the Merger. On the record date, Trustees
and executive officers of the Trust as a group (6 persons) beneficially owned
[157,035] Shares, or [1.6]% of the total outstanding Shares. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT." No directors or
executive officers of the Corporation hold any shares of Corporation Common
Stock.
The Trust does not expect that any other matter will be brought before the
Special Meeting.
You may revoke a proxy at any time before it is voted by:
(1) sending an instrument revoking the proxy or a duly executed proxy bearing
a later date to Property Capital Trust, 177 Milk Street, Suite 14B, Boston, MA
02109, Attention: Secretary; or
(2) by attending the Special Meeting and voting in person.
Attendance at the Special Meeting will not by itself constitute revocation of
a proxy.
If your Shares are held in street name, they will not be voted at the Special
Meeting unless you instruct your broker to do so and how to vote. Shares which
you fail to vote have the same affect as Shares which are voted against the
Merger.
The Trust has engaged Innisfree M&A Incorporated to assist the Trust in the
solicitation of proxies and to provide various proxy services for the Trust in
connection with the Special Meeting at a cost of approximately $7,500 plus
reasonable out-of-pocket expenses.
THE MERGER
(see pages 18-23)
Terms of the Merger. Upon the consummation of the Merger, you will receive:
. one-sixtieth of a share of Corporation Common Stock for each Share you own
with one share of Corporation Common Stock in exchange for any fractional
interest of Corporation Common Stock equal to or greater than .5. (no
Corporation Common Stock or cash in lieu thereof will be issued for
fractional interests of Corporation Common Stock less than .5);
. a Contingent Payment Right; and
. the Cash Consideration, if any.
Recommendation of the Board of Trustees. The Trustees have approved the
Merger and the Merger Agreement. The Trustees unanimously recommend that you
vote "FOR" approval and adoption of the Merger and the Merger Agreement.
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In making such recommendations, the Trustees considered a number of factors,
including the following:
1. The Merger eliminates the need for a liquidating trust, which would have
delayed your receipt of a final distribution from the Trust and reduced the
amount of such distribution by the costs of maintaining and administering the
liquidating trust as well as by the amount of any unsatisfied liabilities of
the Trust.
2. The Trustees will be able to declare a special dividend and payment of the
rights redemption price in the approximate aggregate amount of $.23 per Share
immediately prior to the consummation of the Merger. The Trust will make this
$.23 per Share payment to you shortly after consummation of the Merger. In the
absence of the Merger, the liquidating trust would have held these funds or a
substantial portion thereof as a reserve.
3. The Corporation will provide for the contingent liabilities of the Trust
without the establishment of a liquidating trust.
4. You will receive your pro rata share of the Contingent Payment Rights,
which entitles you to a proportionate share of any additional condemnation
award for the prior taking of one of the Trust's assets. The Trust does not
expect such additional award to exceed $.10 per Share, and it could be zero.
5. The Shareholders will receive Corporation Common Stock representing a
minority equity interest in a continuing enterprise. You should be aware that
your equity interest in the Corporation represents a highly contingent interest
in the future business of the Corporation if and when the Corporation or the
Operating Partnership acquires new assets. As such the value of the Corporation
Common Stock that you will receive in the Merger is not significant, if at all.
Such value may grow in the future if and when the Corporation is successful in
becoming a diversified real estate investment trust, but no assurance can be
given that this will occur.
You should be aware that certain Trustees have a direct or indirect interest
in recommending the Merger, as do certain executive officers of the Trust. None
of the Trustees or executive officers of the Trust will be officers or
directors of the Corporation.
THE MERGER AGREEMENT
(see pages 24-27)
As soon as practicable following satisfaction or waiver of the conditions to
the Merger, the Trust and the Corporation will file articles of merger with the
State Department of Assessments and Taxation of Maryland. The date and time of
the acceptance of the Articles of Merger by the State of Maryland will be the
"Effective Time." Thereafter, the Corporation, through the Exchange Agent, will
deliver your merger consideration.
DO NOT RETURN CERTIFICATES WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS
CONSUMMATED, YOU WILL RECEIVE INSTRUCTIONS FOR EXCHANGING YOUR CERTIFICATES.
CONDITIONS TO THE MERGER
(see page 24)
The consummation of the Merger depends upon the satisfaction of a number of
conditions, the primary one of which is the approval by holders of two-thirds
of the Shares.
TERMINATION
(see page 25)
The Trust and the Corporation may terminate the Merger Agreement by mutual
written consent at any time prior to the Effective Time. The Merger Agreement
also will terminate upon termination of the Investment Agreement (the agreement
that provides for the Related Transactions). Upon such a termination, neither
party will have any further rights or obligations pursuant to the Merger
Agreement except, in the case of termination of the Investment Agreement, for
payment to the Trust of an agreed upon break-up fee. If the Merger Agreement is
terminated and the Merger is not consummated, the Related Transactions will not
occur.
FEES AND EXPENSES
(see pages 25-26)
Except as provided in the Investment Agreement, the Trust and the Corporation
must pay
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their own costs and expenses in connection with the Merger Agreement and the
Related Transactions. Under certain circumstances, The Beal Companies LLP will
pay a liquidation fee and reimburse the Trust for all reasonable legal and
accounting expenses and certain other fees incurred by the Trust up to, but not
to exceed, $350,000. In addition, The Beal Companies LLP has agreed to pay the
legal fees of the Trust in connection with the Merger up to $150,000.
CONTINGENT PAYMENT RIGHT
(see page 19)
Each Contingent Payment Right represents your right to receive your pro rata
share of the additional amount, if any, paid to the Trust, less any reasonably
related costs, including expenses incurred by the Holders' Representative, by
the Department of Transportation of the State of Florida as compensation for
the taking of a portion of a shopping center in Aventura, Florida in which the
Trust had an investment. The Trust will distribute any amounts ultimately
received by it in connection with the pending lawsuit against the State of
Florida for the taking of this property as a Contingent Payment. No assurance
can be given as to the ultimate amount of the Contingent Payment, if any, or as
to the timing of the distribution thereof.
Immediately prior to the Effective Time, the Trust will assign all of its
rights in and to the Contingent Payment to an escrow agent and will provide the
escrow agent with a list of Shareholders entitled to Contingent Payment Rights
(i.e., persons who are Shareholders of the Trust at the time of the Merger).
The Escrow Agent will distribute the Contingent Payment pro rata to the
Shareholders holding Contingent Payment Rights upon receipt of such funds.
CASH CONSIDERATION
(see page 19)
The Cash Consideration represents your right to receive your pro rata share
of a cash payment equal to (i) all cash and cash equivalents, if any, held by
the Trust at the Effective Time, minus (ii) the aggregate amount the Trust is
obligated to repay The Beal Companies LLP pursuant to the Investment Agreement
and (iii) the aggregate amount payable to redeem the rights outstanding
pursuant to the Trust's Shareholder Rights Plan (which amount the Trust will
pay you on the basis of $.01 per Share).
THE RELATED TRANSACTIONS
(see pages 22-23)
The following describes a series of Related Transactions that will be
consummated immediately upon consummation of the Merger:
1. Under the terms of the Investment Agreement, immediately following
consummation of the Merger, FYA will contribute $1 million in cash to the
Corporation in exchange for approximately 319,489 shares of newly issued
Corporation Common Stock. FYA will then distribute such shares to its partners
pro rata based on their percentage interests in FYA.
The following is the pro forma ownership of the Corporation following the
consummation of the Merger:
<TABLE>
<CAPTION>
STOCKHOLDER PERCENTAGE
----------- ----------
<S> <C>
FYA Partners........ 66.7%
Trust Shareholders.. 33.3%
</TABLE>
2. PCT LP will then merge into FYA. Immediately following such merger, FYA
will change its name to "Property Capital Trust Limited Partnership" and become
the Operating Partnership. The Corporation through its pre-merger interest in
PCT LP will own approximately a 33.3% common partnership interest in the
Operating Partnership, and will serve as the sole general partner of the
Operating Partnership. The estimated fair market value of the assets of the
Operating Partnership immediately prior to the consummation of the Related
Transactions will be approximately $4 million. None of those assets constitute
assets owned by the Trust prior to the Merger.
Upon completion of the Merger and the Related Transactions, you will have a
minority interest in the Corporation, which will have a minority interest in
the Operating Partnership. You should be aware that your continuing interest in
the Corporation represents a highly contingent interest in the future business
of the Corporation if and when the Corporation or the Operating Partnership
acquires new assets because the Operating Partnership will
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have outstanding certain equity interests with a priority as to the cash flow
of the Operating Partnership. The Corporation does not expect to receive any
distributions from the Operating Partnership in the foreseeable future. Future
distributions to the Corporation by the Operating Partnership will depend
entirely on whether and when the Operating Partnership acquires additional
assets or the future appreciation in the existing property.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
(see pages 21-22)
You should be aware that certain Trustees and executive officers of the Trust
have interests in the Merger that may be different from, or in addition to,
yours generally. For example, under the Merger Agreement, the Trust and the
Corporation have agreed to indemnify the Trustees, officers, employees and
Shareholders of the Trust (in connection with the affairs of the Trust) to the
same extent as provided in the Trust's Declaration of Trust as in effect on the
date of the Merger Agreement. Neither the Corporation nor the Operating
Partnership will have the authority to amend, repeal or otherwise modify these
provisions for a period of six years from the Effective Time in any manner that
would adversely affect such individuals' rights thereunder, unless such
modification is required by law.
In addition, the Merger Agreement provides that the Corporation will continue
to provide directors' and officers' liability insurance coverage for the
Trust's Trustees and officers for a period of six years from the Effective
Time.
The Merger Agreement designates Robert M. Melzer, the President of the Trust
and a Trustee, as the Holders' Representative in connection with all matters
relating to the Contingent Payment Rights. As the Holders' Representative, Mr.
Melzer will be entitled to payment for his services and reimbursement of all
expenses incurred in connection with the performance of his duties. Such
amounts will be deducted from the Contingent Payment. Further, the Corporation
will indemnify Mr. Melzer for all loss, expense or liability arising out of or
in connection with the distribution of the Contingent Payment and the
performance of his duties as the Holders' Representative.
LISTING OF SHARES
(see page 22)
As a result of the disposition of all of the Trust's real estate investments,
the American Stock Exchange (the "AMEX") halted trading in the Shares at the
close of business on July 10, 1998 and subsequently delisted the Shares on
October 29, 1998. The Trust is now traded on NASDAQ's over-the-counter Bulletin
Board (symbol "PCTG"). At the current time, the Corporation does not intend to
seek an additional listing application for the shares of Corporation Common
Stock to be issued in connection with the Merger and does not expect to be
listed on the AMEX in the near future.
REGULATORY APPROVALS
(see page 22)
Other than the Commission's review of this Proxy Statement/Prospectus and the
filing of the Articles of Merger with the State of Maryland and with The
Commonwealth of Massachusetts, neither the Trust nor the Corporation believes
that any filing with or approval of any governmental authority is necessary in
connection with the consummation of the Merger.
FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS
(see pages 34-36)
The federal income tax consequences of the Merger are uncertain. If the
Merger qualifies as a reorganization, you will not recognize gain or loss with
respect to the receipt of Corporation Common Stock in exchange for Shares of
the Trust and although it is not free from doubt, the receipt by you of the
Contingent Payment Right should be treated separately for federal income tax
purposes as a distribution by the Trust. If the Contingent Payment Right is not
treated separately, you will recognize gain (which may be taxed as ordinary
income), if any, but not loss, on the exchange to the extent of the value of
the Contingent Payment Right, which value is speculative. If the Merger does
not qualify as a reorganization, you will recognize gain or loss equal to the
difference, if any, between your
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adjusted tax basis in your Shares of the Trust and the value of (i) the
Corporation Common Stock received in exchange therefor and (ii) the Contingent
Payment Right you receive. The Corporation Common Stock will not have
significant, if any, present value and the value of the Contingent Payment
Right is speculative.
ACCOUNTING TREATMENT
(see page 23)
For financial accounting purposes, the Merger and the Related Transactions
will be accounted for as a reverse acquisition of the Corporation and the Trust
by FYA.
DISSENTERS' RIGHTS
(see page 23)
You are not entitled to dissenters' rights of appraisal or other dissenters'
rights under either Massachusetts law or Maryland law with respect to the
Merger.
COMPARISON OF SHAREHOLDER RIGHTS
(see pages 37-42)
Your rights are currently determined by the Declaration of Trust. At the
Effective Time, you will become a Stockholder of the Corporation, and
thereafter your rights will be determined by the Amended and Restated Articles
of Incorporation (the "Articles of Incorporation") and By-Laws of the
Corporation and Maryland law. See "COMPARISON OF SHAREHOLDERS' RIGHTS" for a
description of the differences between your existing rights as a Shareholder of
the Trust and your future rights as a Stockholder of the Corporation.
DESCRIPTION OF THE CAPITAL STOCK
OF THE CORPORATION
(see page 43)
Upon the requisite approval of the Shareholders, you will receive shares of
Corporation Common Stock which will be registered pursuant to this Proxy
Statement/ Prospectus. See "DESCRIPTION OF THE CAPITAL STOCK OF THE
CORPORATION" for a summary of the rights of the holders of Corporation Common
Stock.
MARKET PRICES AND
CASH DIVIDENDS INFORMATION FOR THE TRUST
(see page 65)
<TABLE>
<CAPTION>
HIGH LOW CLOSING
------ ------ -------
<S> <C> <C> <C>
June 17, 1998........................................... $.9375 $.8125 $ .875
the last full trading day preceding public announcement
of the signing of the Merger Agreement
June 18, 1998........................................... $ 1.00 $ .875 $.9375
the date on which the Trust announced the signing of the
Merger Agreement
July 10, 1998........................................... $1.125 $ 1.00 $1,125
the last day of trading prior to the halt of trading by
the AMEX
</TABLE>
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SELECTED FINANCIAL DATA
The Trust: The following table sets forth financial information for the Trust
on a historical basis and should be read in conjunction with, and is qualified
in its entirety by, the historical financial statements and notes thereto of
the Trust incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE
MONTHS ENDED FIVE YEARS ENDED
--------------------------- YEAR ENDED MONTHS ENDED ------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JULY 31, JULY 31, JULY 31, JULY 31,
1998 1997 1997 1996** 1996 1995 1994 1993*
------------- ------------- ------------ ------------ -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues................ $2,603 $12,011 $14,717 $ 8,187 $ 21,799 $ 22,619 $ 21,623 $ 16,535
Expenses................ 1,225 9,199 11,232 6,651 21,506 20,603 20,044 24,865
------ ------- ------- -------- -------- -------- -------- --------
Income (Loss) before
Gain on Sale of Real
Estate Investments and
Extraordinary Item..... 1,378 2,812 3,485 1,536 293 2,016 1,579 (8,330)
Gain on Sale of Real
Estate Investments..... 4,083 26,128 27,812 832 6,094 3,209 2,510 7,700
------ ------- ------- -------- -------- -------- -------- --------
Income (Loss) before
Extraordinary Item..... 5,461 28,940 31,297 2,368 6,387 5,225 4,089 (630)
Extraordinary (Loss)
Gain from
Extinguishment of
Debt................... -- -- -- -- (473) 88 -- --
------ ------- ------- -------- -------- -------- -------- --------
Net Income (Loss)....... $5,461 $28,940 $31,297 $ 2,368 $ 5,914 $ 5,313 $ 4,089 $ (630)
====== ======= ======= ======== ======== ======== ======== ========
PER SHARE DATA
Basic Net Income (Loss)
Income (Loss) before
Gain on Sale of Real
Estate Investments and
Extraordinary Item.... $ 0.14 $ 0.30 $ 0.36 $ 0.16 $ 0.03 $ 0.23 $ 0.17 $ (0.93)
Gain on Sale of Real
Estate Investments.... .43 2.73 2.91 0.09 0.67 0.35 0.28 0.85
------ ------- ------- -------- -------- -------- -------- --------
Income (Loss) before
Extraordinary Item.... 0.57 3.03 3.27 0.25 0.70 0.58 0.45 (0.08)
Extraordinary (Loss)
Gain from
Extinguishment of
Debt.................. -- -- -- -- (0.05) 0.01 -- --
------ ------- ------- -------- -------- -------- -------- --------
Basic Net Income (Loss)
per Share............. $ 0.57 $ 3.03 $ 3.27 $ 0.25 $ 0.65 $ 0.59 $ 0.45 $ (0.08)
====== ======= ======= ======== ======== ======== ======== ========
Diluted Net Income
(Loss) per Share....... $ 0.57 $ 3.03 $ 3.27 $ 0.25 $ 0.64 $ 0.59 $ 0.45 $ (0.08)
====== ======= ======= ======== ======== ======== ======== ========
Dividends Declared per
Share.................. $ 1.15 $ 6.03 $ 8.93 $ 1.18 $ 3.23 $ 0.41 $ 0.30 $ 0.28
====== ======= ======= ======== ======== ======== ======== ========
Average Shares
Outstanding............ 9,584 9,561 9,567 9,353 9,097 9,044 9,030 9,029
====== ======= ======= ======== ======== ======== ======== ========
FINANCIAL POSITION AT
YEAR-END
Total Assets............ $3,093 $99,274 $21,183 $103,294 $112,619 $169,439 $176,833 $179,459
Net Real Estate
Investments............ -- 69,753 15,077 98,708 106,912 160,963 172,461 176,024
Total Debt Outstanding.. -- 36,420 8,345 36,650 36,889 71,816 81,479 86,492
Shareholders' Equity.... 2,570 56,767 6,814 61,372 70,076 93,709 91,703 90,134
</TABLE>
- ------
* Restated for change in accounting method to the equity method for Investment
Partnerships. The change did not affect net income (loss) or shareholders'
equity.
** The Trust's fiscal year changed from one which ended on July 31st to one
which ends on December 31st.
7
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FYA: The following table sets forth financial information for FYA on a
historical basis and should be read in conjunction with, and is qualified in
its entirety by, the historical financial statements and notes thereto of FYA
included elsewhere in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- ----------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues................ $ 237 $ 236 $ 315 $ 315 $ 314 $ 314 $ 558
Costs and Operating
Expenses............... 48 44 60 $ 67 101 113 486
-------- -------- ------ ------ ------ ------ ------
Operating Income........ 189 192 255 248 213 201 72
Gain on Sale of Assets.. -- -- -- -- -- -- 2,220
-------- -------- ------ ------ ------ ------ ------
Net Income.............. $ 189 $ 192 $ 255 $ 248 $ 213 $ 201 $2,292
======== ======== ====== ====== ====== ====== ======
FINANCIAL POSITION AT
PERIOD-END
Working Capital......... $ 128 $ 121 $ 122 $ 112 $ 103 $ 87 $ (16)
Total Assets............ 1,547 1,585 1,552 1,587 1,629 1,635 1,663
Partners' Capital....... 1,502 1,540 1,530 1,565 1,607 1,614 1,558
</TABLE>
8
<PAGE>
RISK FACTORS
In addition to the other information contained in this Proxy
Statement/Prospectus, you should consider the following risk factors before you
decide whether or not you wish to approve the Merger. You should be aware that
the majority of these risk factors are relevant only if the Corporation Common
Stock being issued to you has value now or in the future. As already pointed
out, the Corporation does not expect to make distributions on the Corporation
Common Stock for the foreseeable future and such stock has no present value.
Moreover, its value in the future is at best highly speculative. Accordingly,
you should consider the risk factors which affect the financial viability of
the Corporation, the real estate owned by the Operating Partnership and the tax
treatment of the Corporation in light of the negligible value of the interest
you will have in the Corporation and the fact that the receipt of such stock by
you was not a major factor the Trustees of the Trust considered in making their
determination to approve the Merger.
INTERESTS OF CERTAIN DIRECTORS AND OFFICERS OF THE CORPORATION AND TRUSTEES OF
THE TRUST IN THE MERGER
You should be aware that certain Trustees and certain members of management
and of the Board of Directors of the Corporation have certain interests in, and
will receive benefits as a consequence of, the Merger that are separate from
your interests generally. For example, the executive officers of The Beal
Companies LLP will also serve as the executive officers and directors of the
Corporation. In addition, the Operating Partnership will enter into a
management agreement with Beal & Company, Inc. ("Beal Co."), pursuant to which
Beal Co. will provide property management services to the Operating
Partnership. Thus, the interests of The Beal Companies LLP and the officers and
directors of the Corporation in completing this transaction may be different
than yours. In addition, the Corporation has agreed to provide indemnification
of the Trustees, officers, agents, employees and Shareholders of the Trust and
to maintain directors' and officers' liability insurance coverage for the
Trust's Trustees and officers. See "THE MERGER--Interests of Certain Persons in
the Merger (see page 21)." These different interests may result in conflicts
with respect to these individuals' obligations to the Corporation and the Trust
in determining whether they should complete the Merger.
DISTRIBUTIONS DEPENDENT UPON GROWTH
Currently, the Corporation does not expect to receive any distributions from
the Operating Partnership in the foreseeable future because certain partners of
the Operating Partnership will be entitled to receive priority distributions
from the Operating Partnership. These priority distributions will prevent the
Corporation from making any distributions to you in the foreseeable future. As
a result, the value of the Corporation Common Stock that you will receive in
the Merger is not significant, if any. The Corporation's ability to make future
distributions to you depends entirely on whether the Operating Partnership
acquires additional assets or on future appreciation of the existing property.
It may also depend on the extent to which the Operating Partnership issues
future interests. Although the Corporation and the Operating Partnership
anticipate that they will seek opportunities to acquire additional properties
and diversify their portfolio as and when market conditions improve, there is
no assurance that the Corporation or the Operating Partnership will be
successful in achieving any growth. See "THE CORPORATION--Business and Growth
Strategy (see page 28)." If the Operating Partnership is unable to successfully
grow its portfolio, it could materially and adversely affect its results of
operations and financial condition.
RISK OF OWNERSHIP IN BECOMING STOCKHOLDERS OF THE CORPORATION
Aggregate Stock Ownership Limit. In order for the Corporation to qualify as a
REIT under the Internal Revenue Code, not more than 50% in value of its
outstanding shares of capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Internal Revenue Code to include
certain entities) at any time during the last half of the Corporation's taxable
year (other than the first taxable year for which the election to be treated as
a REIT has been made). In order to comply with this requirement, for Federal
income tax purposes and to otherwise address concerns relating to concentration
of capital stock ownership, the Articles of Incorporation of the Corporation
will contain the Aggregate Stock Ownership Limit. This generally
9
<PAGE>
prohibits any single Stockholder from "beneficially owning" (as such term is
defined in the Articles of Incorporation) more than % of the issued and
outstanding shares of Corporation Common Stock. Additionally, the Articles of
Incorporation will contain the Look-Through Ownership Limit, which generally
permits certain mutual funds and certain other widely-held entities to
beneficially own up to 15% of the outstanding shares of such Corporation Common
Stock. The Board of Directors of the Corporation will waive or modify the
Aggregate Stock Ownership Limit and the Look-Through Ownership Limit with
respect to one or more persons if it is established to the reasonable
satisfaction of the Board of Directors that such ownership would not be likely
to disqualify the Corporation as a REIT for Federal income tax purposes. In
connection with the Related Transactions, the Corporation will waive the
Aggregate Stock Ownership Limit with respect to the initial Corporation Common
Stock ownership of Robert L. Beal, Bruce A. Beal and their affiliates because
none will jeopardize the Corporation's status as a REIT for Federal income tax
purposes. The Corporation also may waive the Aggregate Stock Ownership Limit
with respect to certain other Stockholders, if appropriate. In addition, these
ownership limitations may have the effect of inhibiting or impeding a change in
control and, therefore, could adversely affect your ability to realize a
premium over the then current value of the Corporation Common Stock, if any, in
connection with such a transaction.
Changes in Investment and Financing Policies Without Stockholder
Approval. The major policies of the Corporation, including its investment
policy and other policies with respect to acquisitions, financing, growth,
operations, debt and distributions, will be determined by its Board of
Directors, all of whom are officers and principals of The Beal Companies LLP.
The Board of Directors will be able to amend or revise these and other
policies, or approve transactions that deviate from these policies, from time
to time without a vote of the Stockholders. Accordingly, you will have no
control over changes in strategies and policies of the Corporation (other than
through the election of directors), and such changes may not serve the
interests of all Stockholders and could adversely affect the Corporation's
financial condition or results of operations, including its ability to make
distributions to you.
Issuance of Additional Securities. The Corporation will have authority to
offer shares of Preferred Stock, additional shares of Corporation Common Stock
or other equity or debt securities for cash, in exchange for property or
otherwise. The Corporation, as the general partner of the Operating
Partnership, may elect to redeem Common Units of the Operating Partnership for
Corporation Common Stock. Similarly, the Corporation may cause the Operating
Partnership to offer additional interests in the Operating Partnership in
exchange for cash, property or otherwise. You will have no preemptive right to
acquire any such securities. Any such issuance of equity securities could
result in dilution of your investment in the Corporation and continue to have
the effect of eliminating any distributions on your Corporation Common Stock.
LIMITED LIQUIDITY
As a result of the disposition of all of the Trust's real estate investments,
the AMEX halted trading in the Shares at the close of business on July 10, 1998
and subsequently delisted the Shares on October 29, 1998. See "THE MERGER--
Information Regarding the Parties--Property Capital Trust (see page 18)." The
Trust is now traded on NASDAQ's over-the-counter Bulletin Board (symbol
"PCTG"). At the current time, the Corporation does not intend to seek an
additional listing application for the shares of Corporation Common Stock to be
issued in connection with the Merger and does not expect to be listed on the
AMEX in the near future. As such, the shares of Corporation Common Stock you
receive in the Merger may have only limited liquidity. See "MARKET PRICES AND
CASH DIVIDENDS INFORMATION (see page 65)."
REAL ESTATE INVESTMENT RISKS
The following factors will become more relevant to you if the Corporation
achieves growth and therefore, is in a position to make distributions to you.
However, there is no assurance that this will occur.
General Risks. pon consummation of the merger between FYA and PCT LP, the
Operating Partnership's sole asset will be the property located at 51 New York
Avenue, Framingham, Massachusetts. This property is
10
<PAGE>
leased by a single tenant. If this property does not generate revenues
sufficient to meet operating expenses, including debt service and capital
expenditures, the Operating Partnership's cash flow and ability to pay
distributions to its partners will be adversely affected. This in turn will
adversely affect the Corporation's ability to make distributions to you
(although it is not expected that the Corporation will in any event make
distributions to you for the foreseeable future). The following factors, among
others, may adversely affect the revenues generated by this property:
. changes in national economic conditions, changes in local market
conditions due to changes in general or local economic conditions and
neighborhood characteristics;
. changes in interest rates and in the availability, cost and terms of
debt financings;
. the impact of present or future environmental legislation and compliance
with environmental laws and other regulatory requirements;
. the ongoing need for capital improvements;
. failure of the tenant to pay its rent;
. changes in real estate tax rates and other operating expenses (including
utilities);
. the ability to provide adequate management and maintenance;
. adverse changes in zoning laws; and
. floods and other natural disasters (which may result in uninsured
losses) and other factors which are beyond the Corporation's or the
Operating Partnership's control.
Certain significant expenditures associated with the property (such as loan
payments, real estate taxes, insurance and maintenance costs) will generally
not be reduced when circumstances cause a reduction in income from the
investment. For example, if the Corporation or the Operating Partnership is
unable to meet the loan payments, we could sustain a loss as a result of
foreclosure on the property or the exercise of other remedies by the lender. In
addition, real estate values and income from rental properties are also
affected by such factors as the cost of compliance with government regulations,
including zoning and tax laws, interest rate levels and the availability of
financing. Any material changes due to such events could adversely affect the
revenues generated by this property.
Value and Illiquidity of Real Estate. Real estate investments are relatively
illiquid. The Operating Partnership's ability to diversify its portfolio in
response to changes in economic and other conditions will therefore be limited.
If the Operating Partnership wants to sell its property, there is no assurance
that it will be able to dispose of the property in the time period it desires
or that the sales prices of the property will recoup or exceed the amount of
the Operating Partnership's investment.
Property Taxes. The property is subject to real property taxes, which may
increase or decrease as property tax rates change and as the value of the
property is assessed or reassessed by taxing authorities. Under the terms of
the existing lease, the tenant is responsible for the payment of taxes. There
is no assurance that a lease with a new tenant will have similar provisions.
Risks Associated with Local Market Conditions. The Operating Partnership's
sole asset will be located in Massachusetts. Consequently, economic conditions
in this market will significantly influence the Operating Partnership's and the
Corporation's future performance. Because the Operating Partnership lacks
geographical diversity, a decline in the economy in Massachusetts, or in the
United States generally, could materially and adversely affect its operating
results. In addition, local market and economic conditions may significantly
affect occupancy or rental rates in that market. Occupancy and rental rates, in
turn, may significantly affect the Operating Partnership's profitability and
its ability to satisfy its financial obligations. These risks include:
. the local economic climate (which may be adversely impacted by plant
closings, industry slowdowns and other factors);
11
<PAGE>
. local real estate conditions (such as an oversupply of, or a reduced
demand for, office space); and
. the inability or unwillingness of the tenant to pay its rents or any
rent increases.
Any of these risks could adversely affect the Corporation's ability to make
future distributions to you.
Competition. This office and research and development building competes with
other rental alternatives in attracting tenants, including other office
properties that are available for rent. Competitive office and research and
development space in the Framingham area could adversely affect our ability to
release this property to the existing tenant or to lease our space to a new
tenant. It also may impact our ability to increase or maintain rents. There is
no assurance that the tenant will renew its lease at the end of the current
term. If the tenant does not renew its lease, then the property may remain
vacant for a period of time. If this occurs, the Operating Partnership will not
have sufficient revenues to make distributions to its partners. In addition,
the Operating Partnership may be subject to construction expenses for tenant
improvements, free rent incentives if necessary and payment of leasing
commissions to brokers. In addition, competitors for acquisitions of office
properties may have greater resources than the Corporation and the Operating
Partnership, putting us at a competitive disadvantage for potential new
investments.
Uninsured and Underinsured Losses. After the Merger, the Operating
Partnership intends to maintain comprehensive insurance on the property,
including liability, fire and extended coverage. The Operating Partnership
believes such specified coverage will be of the type and amount customarily
obtained for or by an owner of office properties. However, there are certain
types of losses, generally of a catastrophic nature, such as floods, that may
be uninsurable or not economically insurable. We will use our discretion in
determining amounts, coverage limits and deductibility provisions of insurance,
with a view to maintaining appropriate insurance coverage on the investments of
the Corporation and the Operating Partnership at a reasonable cost and on
suitable terms. This may result in insurance coverage that, in the event of a
substantial loss, would not be sufficient to pay the full current market value
or current replacement cost of the property or any future investments of the
Corporation or the Operating Partnership. Inflation, changes in building codes
or ordinances, environmental considerations, and other factors also might make
it infeasible to use insurance proceeds to replace the property after the
property has been damaged or destroyed. Under such circumstances, the insurance
proceeds received by the Corporation or the Operating Partnership might not be
adequate to restore its economic position with respect to such property.
Risks of Property Damage and Increased Expenses Resulting from Inclement
Weather. The location of our property in Massachusetts exposes us to risks
associated with inclement winter weather, including increased costs for the
removal of snow and ice. In addition, inclement weather could increase the need
for maintenance and repair of our property. These costs could adversely effect
our financial performance.
Potential Liability for Environmental Contamination. Under various federal,
state and local environmental laws, regulations and ordinances, current or
former owners of real estate, as well as certain other categories of parties,
may be required to investigate and clean up hazardous or toxic chemicals,
substances or waste or petroleum product or waste (collectively, "Hazardous
Materials") releases on, under, in or from such property, and may be held
liable to governmental entities or to third parties for certain damage and for
investigation and cleanup costs incurred by such parties in connection with the
release or threatened release of Hazardous Materials. Such laws typically
impose responsibility and liability without regard to whether the owner knew of
or was responsible for the presence of Hazardous Materials, and the liability
under such laws has been interpreted to be joint and several under certain
circumstances.
The costs of investigation and cleanup of Hazardous Materials on, under, in
or from property can be substantial, and the fact that the property has had a
release of Hazardous Materials, even if remediated, may adversely affect the
value of the property and the owner's ability to sell or lease the property or
to borrow using the property as collateral. In addition, some environmental
laws create a lien on a property in favor of the government for damages and
costs it incurs in connection with the release or threatened release of
Hazardous
12
<PAGE>
Materials. The presence of Hazardous Materials on a property could result in a
claim by a private party for personal injury or a claim by a neighboring
property owner for property damage. Such costs or liabilities could exceed the
value of the affected real estate.
Other federal, state and local laws and regulations govern the removal or
encapsulation of asbestos-containing material when such material is in poor
condition or in the event of building remodeling, renovation or demolition.
Still other federal, state and local statutes, regulations and ordinances may
require the removal or upgrading of underground storage tanks that are out of
service or out of compliance. Non-compliance with environmental or health and
safety requirements may also result in the need to cease or alter operations at
a property, which could affect the financial health of a tenant and its ability
to make lease payments. Furthermore, if there is a violation of such a
requirement in connection with a tenant's operations, it is possible that the
Operating Partnership, as the future owner of the property, could be held
accountable by governmental authorities for such violation and could be
required to correct the violation.
The property has been the subject of Phase I environmental assessment by
independent environmental consultant and engineering firms. Phase I assessments
do not involve subsurface testing. These environmental assessments have not
revealed any environmental conditions that the Corporation or the Operating
Partnership believe will have a material adverse effect on their business,
assets or results of operations, and neither the Corporation nor the Operating
Partnership is aware of any other environmental conditions with respect to the
property that they believe would have such a material adverse effect.
We cannot assure you that:
. the environmental assessment identified all potential environmental
liabilities;
. that no prior owner created any material environmental condition not
known to us or the consultants who prepared the assessments;
. that no environmental liabilities developed since such environmental
assessment was prepared;
. that the condition of land or operations in the vicinity of our property
(such as the presence of underground storage tanks) will not affect the
environmental condition of our property; or
. that future uses or conditions (including, without limitation, changes
in applicable environmental laws and regulations) will not result in the
imposition of environmental liability.
COMPARISON OF STOCKHOLDER RIGHTS
Certain provisions of the Corporation's Articles of Incorporation and By-laws
(collectively, the "Charter Documents") could have a potential anti-takeover
effect. The following provisions could have the effect of making it more
difficult for a third party to acquire control of the Corporation, including
certain acquisitions that Stockholders may deem to be in their best interests:
. the Charter Documents provide for a classified board of directors;
. following the Merger, the Articles of Incorporation will permit removal
of directors of the Corporation, other than upon expiration of their
term, only for cause and only by the affirmative vote of holders of a
majority of the Corporation Common Stock;
. the Articles of Incorporation contain restrictions on the number of
shares that may be owned by any Stockholder or group of Stockholders;
. the Articles of Incorporation will permit, if approved by the
Stockholders of the Corporation, the issuance of one or more series of a
new class of securities with rights and preferences to be determined by
the Board of Directors;
. Maryland law restricts certain business combinations with interested
Stockholders; and
. the By-Laws require advance notice of Stockholder proposals and director
nominations.
See "COMPARISON OF SHAREHOLDERS' RIGHTS (see page 37)."
13
<PAGE>
SUBSTANTIAL EXPENSES AND PAYMENTS IF THE MERGER OR THE RELATED TRANSACTIONS
FAIL TO OCCUR
Neither the Trust nor the Corporation can assure you that the Merger will be
completed. If the Merger is not completed, the Beal Companies LLP will have
incurred substantial expenses in connection with the transactions described in
this Proxy Statement/Prospectus. Further, the Related Transactions will not
occur unless the Merger is consummated because the consummation of the Related
Transactions is contingent on the completion of the Merger.
The Beal Companies LLP paid the Trust a deposit towards possible liquidated
damages that may come due the Trust. If FYA or the Corporation terminate the
Investment Agreement under the following circumstance, then the Trust will be
entitled to retain the deposit as a termination payment:
CIRCUMSTANCES FEE
- --------------------------------------------------------------------------------
up to $350,000
The Trust satisfies the conditions to the closing of
the transactions described herein, but FYA fails to
consummate the Related Transactions by the end of the
4th business day after issuance of the Corporation
Common Stock
In addition, if the parties terminate the Investment Agreement under the
following circumstances, the Trust will be obligated to return a portion of the
deposit and/or make a termination payment to The Beal Companies LLP:
CIRCUMSTANCES FEE
- --------------------------------------------------------------------------------
return of up to
The Shareholders of the Trust do not approve the $310,000
Merger by the 60th day after delivery of this Proxy
Statement/Prospectus to the Trust for mailing to its
Shareholders
- --------------------------------------------------------------------------------
The Trust fails to satisfy certain conditions to the return of up to
closing of the transactions described herein by the $310,000 plus
end of the 4th business day after issuance of the $250,000
Corporation Common Stock and approval of the Merger
by the Shareholders or the Trust fails to comply in
good faith with its covenants
See "THE MERGER AGREEMENT--Termination," and "--Fees and Expenses (see page
25)."
FEDERAL INCOME TAX RISKS--FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST
The Corporation intends to operate in a manner that will allow it to continue
to qualify as a REIT. Although the Corporation believes that it has been
organized and its past and present operations qualify it as a REIT, it cannot
assure you that this is true, or that it will remain qualified as a REIT in the
future. This is because qualification as a REIT involves (i) the application of
highly technical and complex Internal Revenue Code provisions for which there
are only limited judicial or administrative interpretations and (ii) the
determination of various factual matters and circumstances not entirely within
our control.
If the Trust failed to qualify as a REIT prior to the Merger, this failure
could disqualify the Corporation as a REIT. If the Corporation fails to qualify
as a REIT, it will be subject to federal income tax on its taxable income at
regular corporate rates for both current and past years. In this event, the
Corporation could be subject to potentially significant tax liabilities, and
the amount of cash available for distribution to you would be reduced and
possibly eliminated. Unless entitled to relief under certain statutory
provisions, the Corporation would also be disqualified from treatment as a REIT
for the four taxable years following the year during which qualification was
lost.
Pursuant to the Internal Revenue Code provisions relating to REITs, the
Corporation must distribute annually at least 95% of its net taxable income
(excluding any net capital gain) to avoid corporate income taxation of the
earnings that it distributes. In addition, the Corporation will be subject to a
4% nondeductible excise tax on the amount, if any, by which certain
distributions paid or deemed paid by it with respect to any
14
<PAGE>
calendar year are less than the sum of (i) 85% of its ordinary income for that
year, (ii) 95% of its capital gain net income for that year, and (iii) 100% of
its undistributed taxable income from prior years. The amount of any net long-
term capital gains that the Corporation elects to retain and pay income tax on
will be treated as distributed for purposes of the 4% excise tax.
The Corporation intends to make the necessary distributions to its
Stockholders to comply with the 95% distribution requirement and also to avoid
the nondeductible excise tax. However, differences in timing between the
recognition of taxable income and the actual receipt of cash could require the
Corporation to borrow funds on a short-term basis or sell assets on a short-
term basis to meet the 95% distribution requirement and to avoid the
nondeductible excise tax. The requirement to distribute a substantial portion
of the Corporation's net taxable income could cause the Corporation to do any
of the following:
. sell assets in adverse market conditions;
. distribute amounts that represent a return of capital; or
. distribute amounts that would otherwise be spent on future acquisitions,
capital expenditures, or repayment of debt.
Net income derived from a "prohibited transaction" is subject to a 100% tax.
According to the Internal Revenue Code, a "prohibited transaction" generally
includes a sale or other disposition of property (other than foreclosure
property) that is held primarily for sale to customers in the ordinary course
of a trade or business. Consequently, the Corporation will have to consider
this Internal Revenue Code provision in connection with future dispositions of
its assets and over the next four years may make bulk sales of assets (directly
or through a merger) more attractive than multiple sales of individual assets.
However, the Corporation will attempt to conduct its business so that it will
not be characterized as being engaged in prohibited transactions.
DEPENDENCE ON THE BEAL COMPANIES LLP
The initial executive officers of the Corporation and all of the members of
the Board of Directors of the Corporation will also be executive officers and
principals of The Beal Companies LLP. As such, the Corporation believes that
its success, at least initially, will depend to a significant extent upon the
experience of Bruce A. Beal, Robert L. Beal and Michael A. Manzo. The
Corporation believes that these individuals' reputations in the real estate
investment industry will assist the Corporation and the Operating Partnership
in identifying potential assets for acquisition. See "THE CORPORATION--
Description of Business of the Corporation (see page 28)." The loss of any of
these individual's management services could have a material adverse effect on
the operations of the Corporation because the Corporation would have a
diminished capacity to obtain real estate investment opportunities and to
capitalize upon their relationships in the real estate industry. The
Corporation cannot guarantee the continued service of these individuals because
the Corporation does not currently intend to maintain employment agreements
with its executive officers. In addition, the Corporation does not currently
intend to maintain key man life insurance with respect to any of its executive
officers. The Corporation may not be able to successfully recruit additional
personnel and any additional personnel who are recruited may not have the
requisite skills, knowledge or experience necessary or desirable to enhance the
incumbent management. Moreover, all of the Corporation's key officers will
continue to be employees of The Beal Companies LLP, and certain conflicts of
interest between these executives and the Corporation may arise.
LACK OF OPERATING HISTORY AS A REIT
After the consummation of the Merger and the Related Transactions, the
Corporation, through the Operating Partnership, will continue to own and
operate the property previously owned by FYA. The executive officers of the
Corporation, as executive officers of The Beal Companies LLP, were involved in
the management of such property. See "THE CORPORATION--Description of Business
of the Corporation" and "--Business and Growth Strategy (see page 28)."
However, the Corporation will not have any operating history as a REIT and its
operating policies and strategies are untried. Therefore, as a newly organized
company, the Corporation's policies and procedures are subject to change over
time and may become materially different than those described herein.
15
<PAGE>
THE SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to you in connection with
the solicitation of proxies by or on behalf of the Trustees for use at the
Special Meeting.
PURPOSE OF THE SPECIAL MEETING; DATE, TIME AND PLACE.
The Special Meeting will be held at the offices of Goodwin, Procter & Hoar
LLP, Exchange Place, 2nd Floor, Boston, Massachusetts on
at 9:00 a.m. (Eastern Standard Time). At the Special Meeting, you will be asked
to consider and vote upon a proposal to approve and adopt the Merger and the
Merger Agreement.
RECORD DATE; SOLICITATION OF PROXIES
The Trustees of the Trust fixed the close of business on , 1998 as
the record date for the determination of Shareholders entitled to notice of,
and to vote at, the Special Meeting. At the record date, [ ] Shares
were issued and outstanding and entitled to vote at the Special Meeting. You
are entitled to one vote at the Special Meeting for each Share of record you
hold on the record date.
In addition to the solicitation of proxies by use of the mails, the Trust and
its Trustees, officers and employees (who will receive no additional
compensation therefor) may also solicit proxies by telephone, facsimile
transmission and other electronic communication methods or personal interview.
The Trust will reimburse banks, brokers, custodians and other fiduciaries who
hold Shares in their name or custody, or in the name of nominees for others,
for their out-of-pocket expenses incurred in forwarding copies of this Proxy
Statement/Prospectus to those persons for whom they hold such Shares. The Trust
will bear the costs of the Special Meeting and of soliciting proxies therefor.
The Trust's proxy solicitor, Innisfree M&A Incorporated, has agreed to assist
the Trust in connection with the solicitation of proxies. Pursuant to the
Trust's agreement with Innisfree M&A Incorporated, Innisfree M&A Incorporated
will provide various proxy services for the Trust in connection with the
Special Meeting at a cost of approximately $7,500, plus reasonable out-of-
pocket expenses.
Any questions or requests for assistance regarding this Proxy
Statement/Prospectus and related proxy materials may be directed to Innisfree
M&A Incorporated by telephone at 1-888-750-5834.
VOTE REQUIRED
One-third of the outstanding Shares entitled to vote as of the record date,
represented in person or by proxy, are required for a quorum at the Special
Meeting. The affirmative vote of holders of two-thirds of the Shares
outstanding as of the record date is required for approval and adoption of the
Merger and the Merger Agreement. Abstentions may be specified with respect to
the approval and adoption of the Merger and the Merger Agreement and will be
counted as present for the purpose of determining the existence of a quorum but
will have the effect of a negative vote due to the requirement of the
affirmative vote described in the preceding sentence.
On the record date, Trustees and executive officers of the Trust as a group
(6 persons) beneficially owned [157,035] Shares, or [1.6]% of the total
outstanding Shares. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
PROXIES
Shares which are represented by properly executed proxies, unless such
proxies shall have previously been properly revoked, will be voted in
accordance with the instructions indicated in such proxies. If you do not
indicate contrary instructions, the proxy appointees will vote your Shares
"FOR" approval and adoption of the Merger and the Merger Agreement and in the
discretion of such proxy appointees as to any other matter which may properly
come before the Special Meeting.
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<PAGE>
While brokers who hold Shares in street name have the authority to vote on
certain items when they have not received instructions from beneficial owners,
such brokers will not be entitled to vote on the Merger and the Merger
Agreement absent instructions. Shares held by such brokers who do not receive
instructions but which are reported as "instructions withheld" will be treated
as present, in person or by proxy, at the Special Meeting and counted as
present for quorum purposes. A failure by a broker to vote, however, will have
the effect of a negative vote on the approval of the Merger and the Merger
Agreement due to the requirement of the affirmative vote described above. It is
therefore essential that, if your Shares are held by a broker, you give your
broker voting instructions.
It is not expected that any matter other than that referred to in this Proxy
Statement/Prospectus will be brought before the Special Meeting. If, however,
other matters are properly presented, including, among other things, a motion
to adjourn or postpone the Special Meeting to another time and/or place for the
purpose of, among other things, soliciting additional proxies in favor of
approval and adoption of the Merger and the Merger Agreement, the proxy
appointees will vote in accordance with their best judgment on such matters and
consistent with the voting rights of such Shares as provided by the Trust's
Declaration of Trust. However, under these circumstances the proxy appointees
will not vote any proxy that is voted or is treated as voted against approval
and adoption of the Merger and the Merger Agreement in favor of any adjournment
or postponement for the purpose of soliciting additional proxies. At any
subsequent reconvening of the Special Meeting, the proxy appointees will vote
all proxies in the same manner as such proxies would have been voted at the
original convening of the Special Meeting, except for proxies that have been
effectively revoked prior to such reconvened meeting. The grant of a proxy will
also confer discretionary authority on the proxy appointees to vote in
accordance with their best judgment on matters incident to the conduct of the
Special Meeting.
You may revoke a proxy at any time before it is voted by filing with the
Secretary of the Trust an instrument revoking the proxy or a duly executed
proxy bearing a later date, or by attending the Special Meeting and voting in
person. The last proxy executed by you will revoke all previous proxies
executed by you. Any such filing should be sent to Property Capital Trust, 177
Milk Street, Suite 14B, Boston, MA 02109; Attention: Secretary. Attendance at
the Special Meeting will not by itself constitute revocation of a proxy.
The Merger and the Merger Agreement to be considered at the Special Meeting
involve matters of great importance to you. Accordingly, the Trust urges you to
read and carefully consider the information presented in this Proxy
Statement/Prospectus and the annex hereto. The Trust also urges you to
complete, date, sign and promptly return the enclosed proxy card in the
accompanying prepaid envelope.
DO NOT SEND CERTIFICATES WITH THE ENCLOSED PROXY CARD. IF THE MERGER IS
CONSUMMATED, YOU WILL BE FURNISHED INSTRUCTIONS FOR EXCHANGING YOUR
CERTIFICATES.
17
<PAGE>
THE MERGER
The following is a summary of the material terms of the Merger. You should be
aware that this summary does not purport to be complete. This summary is
qualified in its entirety by reference to the complete text of the Merger
Agreement, a copy of which is included in this Proxy Statement/Prospectus as
Annex A. The Trust urges you to review the Merger Agreement carefully.
INFORMATION REGARDING THE PARTIES
Property Capital Trust. The Trust was organized on June 9, 1969, and has
qualified and elected to be taxed as a REIT under the Internal Revenue Code
since its organization. In 1995, the Trustees of the Trust adopted a business
plan, which the Shareholders ratified, that provided for the disposition of all
of the Trust's investments. Since that time, the Trust has been divesting
itself of its real estate investments on a property-by-property basis.
On June 17, 1998, the Trust sold its last real estate investment and the
Trustees declared a special dividend of $.80 per share payable on July 10,
1998. As a result of this sale and distribution, the Trust does not expect to
have, immediately prior to the Effective Time, any assets other than (i)
approximately $.23 per Share in cash which the Trustees intend to distribute to
Shareholders shortly after the Effective Time of the Merger as a special
dividend and the redemption price for the rights issued pursuant to the Trust's
Shareholder Rights Plan, and (ii) any Contingent Payment which may be collected
by the Trust, which payment, if and when collected, the Escrow Agent will
distribute to Shareholders who were such at the Effective Time. In anticipation
of the Merger, the Trustees will elect to redeem the outstanding rights under
the Trust's Shareholder Rights Plan. The rights are redeemable at $.01 per
right and such redemption price is included in the $.23 per Share distribution
mentioned above. Following this final distribution, the Trust will have
distributed approximately $13.88 per Share to Shareholders from the net
proceeds of the sale of all of its real estate investments pursuant to the
business plan.
Maryland Property Capital Trust, Inc. The Corporation was organized on June
15, 1998 as a wholly-owned subsidiary of the Trust. Pursuant to the Merger
Agreement, if the holders of two-thirds of the outstanding Shares approve and
adopt the Merger Agreement, the Trust will merge into the Corporation and the
Corporation will be the surviving entity. Immediately thereafter, the
Corporation will change its name to "Property Capital Trust, Inc." Following
completion of the Merger, the Corporation will continue to elect to be treated
as a REIT.
The Corporation does not own directly any real estate. At the present time,
the Corporation's sole asset is its general partnership interest in PCT LP.
Upon completion of the Related Transactions, the Corporation's sole asset will
be its approximate 1% general partnership interest and approximate 32.3% common
limited partnership interest in the Operating Partnership.
Framingham York Associates Limited Partnership. FYA holds approximately 1.1
acres of land improved by a one story combined office and research and
development building of 17,250 square feet of rentable space. See "THE
CORPORATION--Description of Property." As part of the Related Transactions, FYA
will borrow $1 million in cash and use such funds to purchase approximately
319,489 shares of newly issued Corporation Common Stock. The Corporation will
contribute this cash to the Operating Partnership, which expects to use this $1
million to pay the costs of the Merger and the Related Transactions. FYA will
then distribute such shares to its partners based on their pro rata percentage
interests in FYA. Following such purchase and distribution of Corporation
Common Stock, PCT LP will merge into FYA.
Property Capital Trust Limited Partnership. The Corporation is the sole
general partner of PCT LP, which has no assets at the present time. As part of
the Related Transactions, PCT LP will merge into FYA. Pursuant to such merger,
PCT LP will cease to exist and FYA will be the surviving entity. Immediately
thereafter, FYA will change its name to "Property Capital Trust Limited
Partnership" and become the Operating Partnership.
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<PAGE>
Upon consummation of this merger, all of the assets and liabilities of FYA will
become the assets and liabilities of the Operating Partnership.
THE MERGER CONSIDERATION
Upon consummation of the Merger you will receive:
. one-sixtieth of a share of the Corporation Common Stock for each Share
held, with one share of Corporation Common Stock to be exchanged for any
fractional interest equal to or greater than .5 (no shares of
Corporation Common Stock or cash in lieu thereof will be issued in
exchange for fractional interests of Corporation Common Stock less than
.5); and
. a Contingent Payment Right.
In addition, immediately prior to the Effective Time of the Merger, the
Trustees intend to declare a special dividend of approximately $.22 per Share
and a redemption payment of $.01 per Share for the rights outstanding under the
Trust's Shareholder Rights Plan.
CONTINGENT PAYMENT RIGHT
The Contingent Payment Right represents your right to receive your pro rata
share of the additional amount paid, if any, to the Trust, less any reasonably
related costs, including expenses incurred by the Holders' Representative, by
the Department of Transportation of the State of Florida as compensation for
the taking of a portion of a shopping center in Aventura, Florida in which the
Trust had an investment. The State of Florida paid the Trust approximately
$325,000 as compensation for the taking of this property. The Trust, however,
has instituted legal proceedings against the State of Florida contesting the
amount owed and is seeking an additional $1.0 million. Mediation between the
State and the Trust to resolve this dispute occurred in June 1998 and was
unsuccessful. A trial date has been scheduled for January, 1999. Any net
amounts ultimately received by the Trust will be distributed as a Contingent
Payment to holders of the Contingent Payment Rights. No assurance can be given
as to the ultimate amount of the Contingent Payment, if any, or as to the
timing of the distribution thereof. The Trust does not expect, however, that
the Contingent Payment will exceed $.10 per Share, and it could be zero.
Immediately prior to the Effective Time, the Trust will assign all of its
rights in and to the Contingent Payment to the Escrow Agent and will provide
such Escrow Agent with a list of Shareholders entitled to Contingent Payment
Rights (i.e., the Shareholders of the Trust at the Effective Time). The Escrow
Agent will enter into an Escrow Agreement with the Trust providing for the
distribution of the Contingent Payment pro rata to the Shareholders holding
Contingent Payment Rights upon receipt of such funds. The Contingent Payment
Rights will not be evidenced by any certificate or other instrument, will not
have voting or other rights and will not be assignable or transferable except
by operation of law. Furthermore, the Contingent Payment Right will not accrue
or pay any dividends or interest.
CASH CONSIDERATION
The Cash Consideration represents your right to receive your pro rata share
of (i) all cash and cash equivalents, if any, held by the Trust at Effective
Time, minus (ii) the aggregate amount the Trust is obligated to repay The Beal
Companies LLP pursuant to the Investment Agreement (See "THE MERGER AGREEMENT--
Fees and Expenses") and (iii) the aggregate amount payable to redeem the rights
pursuant to the Trust's Shareholder Rights Plan. Immediately prior to
consummation of the Merger, the Trustees intend to declare a special dividend
of approximately $.22 per Share and redeem the rights upon payment of the $.01
per Share rights redemption price. The Cash Consideration, if any, will not
accrue or pay any dividends or interest.
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<PAGE>
RECOMMENDATION OF THE BOARD OF TRUSTEES
The Trustees unanimously have determined that the Merger and the Merger
Agreement are advisable, fair and in the best interests of the Trust and its
Shareholders. At a Special Meeting held on June 16, 1998 and by Consent of
Trustees in Lieu of Meeting dated as of October 16, 1998, the Trustees approved
the Merger and the Merger Agreement, subject to the approval of the Merger and
the Merger Agreement by the Corporation's Board of Directors and the
Shareholders of the Trust.
THE TRUSTEES RECOMMEND THAT YOU VOTE "FOR" APPROVAL AND ADOPTION OF THE
MERGER AND THE MERGER AGREEMENT.
In considering the recommendation of the Trustees, you should be aware that
certain Trustees and executive officers of the Trust have an interest in
recommending the Merger that may be different from, or in addition to, yours
generally. See "THE MERGER--Interests of Certain Persons in the Merger."
BACKGROUND OF AND REASONS FOR THE MERGER
Background of the Merger. The terms of the Merger Agreement are the result of
arm's-length negotiations among representatives and legal advisors of the
Trust, the Corporation and the other parties to the Related Transactions, each
of which is an affiliate of The Beal Companies LLP (the "Beal Affiliates"). The
following is a brief discussion of some of the factors considered by the
Trustees in reaching their decision to approve the Merger and the Merger
Agreement.
Following the adoption of the business plan at the Trust's 1995 Annual
Meeting, the Trust began the process of divesting itself of its real estate
investments on a property-by-property basis. See "--Information Regarding the
Parties--Property Capital Trust." Over the ensuing three years, the Trust
disposed of 27 real estate investments. The Trust utilized the net proceeds of
such sales to discharge indebtedness and pay special dividends to its
Shareholders. The Trust distributed to its Shareholders an aggregate amount of
$13.65 per Share in special dividends from the time of approval of the business
plan by the Shareholders in December 1995 through and including July 10, 1998.
These distributions exceeded the initial estimate of $10.00 per Share announced
by the Trust in the Trust's 1995 proxy statement.
In the summer of 1997, management of the Trust and the Trustees began to
consider alternatives for terminating the Trust. The Trustees considered two
alternatives. Under the first alternative, the Trust would form a "liquidating
trust," transfer its remaining assets to the liquidating trust and terminate
its existence. The liquidating trust would then continue for up to three years
to ensure that all of the Trust's known and contingent liabilities were
satisfied out of the remaining cash assets contributed by the Trust.
Ultimately, the liquidating trust itself would be dissolved and its remaining
assets, after payment of liabilities of the Trust and expenses of the
liquidating trust, would be distributed. As a second alternative, management
discussed with the Trustees the possibility of the Trust's being acquired by a
real estate company that would succeed to all of its assets and liabilities.
This alternative would obviate the need for a liquidating trust and enable the
Trust to distribute all of its assets to its existing Shareholders at the time
of its acquisition by such company.
In the fall of 1997, management of the Trust began contacting persons and
entities it thought might be interested in acquiring the Trust. As a result of
these contacts, the Trust had discussions with several parties, including
representatives of the Beal Affiliates, regarding the sale of the Trust. The
Trust entered into a letter of intent with one potential acquiror in January
1998, but the transaction contemplated by that letter of intent was never
consummated. Thereafter, negotiations with the Beal Affiliates intensified and
on June 16, 1998, the Trustees met and discussed the terms and provisions of
the proposed Merger. At the meeting, the Trustees discussed the merits of the
transaction, including those set forth below under "--Reasons for the Merger."
Following this discussion, the Trustees present at the meeting unanimously
approved the terms of the Merger Agreement. On June 18, 1998, the parties
finalized their agreements and entered into the Merger Agreement. Thereafter,
the parties entered into amendments to the Merger Agreement to change in
various respects the structure of the Merger and the Related Transactions.
20
<PAGE>
As a result of these discussions, the Trustees unanimously have determined
that the Merger, the terms of the Merger Agreement and the terms of the Related
Transactions are fair to, and in the best interests of, the Trust and its
Shareholders.
Reasons for the Merger. In determining to approve the Merger and the Merger
Agreement and to recommend that you approve the Merger and the Merger
Agreement, the Trustees considered a number of factors, including the
following:
1. The Merger obviates the need for a liquidating trust, which would have
delayed receipt by you of a final distribution from the Trust and would
have reduced such distribution by expenses of operating and maintaining
the liquidating trust (net of short-term investment income).
2. The Trustees will be able to distribute approximately $.23 per Share
(including $.01 per Share to redeem outstanding rights under the
Trust's Shareholder Rights Plan) to you shortly after the consummation
of the Merger. In the absence of the Merger, the liquidating trust
would have held these funds or a substantial portion thereof as a
reserve.
3. The Trust's contingent liabilities will be provided for without the
establishment of a liquidating trust or the use of any of the Trust's
assets to satisfy such liabilities, if there are any.
4. The Shareholders will receive the benefit, if any, of the Contingent
Payment.
Based on these considerations, the Trustees determined that the Merger and
the Merger Agreement are advisable, fair and in your best interests. While it
is true that the Shareholders will receive Corporation Common Stock, the
Trustees did not regard this as a significant reason for the Merger. The reason
is that, because of the structure of preferred partnership interests in the
Operating Partnership, no distributions will be paid on the Corporation Common
Stock for the foreseeable future. The Corporation Common Stock will have any
significant value only if the Corporation or the Operating Partnership acquires
additional assets in the future or the existing property appreciates in value.
The amount of such value of the Corporation Common Stock can be affected by the
future issuance of common or preferred interests in the Operating Partnership
or equity securities of the Corporation. Accordingly, the Trustees considered
the Corporation Common Stock to have no present value.
The foregoing discussion of the information and factors considered by the
Trustees is not intended to be exhaustive, and such information and factors
were considered collectively by the Trustees in connection with their review of
the Merger Agreement and the Related Transactions. In addition, individual
Trustees may have given different weight to different factors. For a discussion
of additional factors which were considered by the Trustees, see "--Interests
of Certain Persons in the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
You should be aware that certain Trustees and executive officers of the Trust
have interests in the Merger that may be different from, or in addition to,
yours generally.
Under the Merger Agreement, the Trust and the Corporation have agreed that
the Charter Documents of the Corporation and the partnership agreement of the
Operating Partnership will contain provisions no less favorable with respect to
indemnification of Trustees, officers, agents, employees and Shareholders (in
connection with the affairs of the Trust) than those set forth in the Trust's
Declaration of Trust as in effect on the date of the Merger Agreement. Further,
the Trust and the Corporation have agreed that they will not amend, repeal or
otherwise modify such provisions for a period of six years from the Effective
Time in any manner that would adversely affect the rights thereunder of
individuals who at or prior to the Effective Time were Trustees, officers,
agents, employees or Shareholders of the Trust, unless such modification is
required by law.
In addition, at or prior to the Effective Time, the Corporation will purchase
or keep in effect directors' and officers' liability insurance coverage for the
Trust's Trustees and officers which shall provide such Trustees and
21
<PAGE>
officers with tail or other coverage for six years from the Effective Time.
Such coverage will have terms not substantially less favorable to the insured
persons than the coverage presently maintained by the Trust.
Mr. Melzer, President of the Trust and a Trustee, has certain interests in
the outcome of the Merger in addition to those of other Shareholders. The
Merger Agreement designates Mr. Melzer as the Holders' Representative to act on
your behalf in all matters relating to the Contingent Payment Rights. As the
Holders' Representative, Mr. Melzer will be entitled to receive payment for his
services and reimbursement of all expenses incurred in connection with the
performance of his duties. Such amounts will be deducted from the Contingent
Payment. Further, the Corporation has agreed to indemnify Mr. Melzer for all
loss, expense or liability arising out of or in connection with the
distribution of the Contingent Payment Rights and the performance of his duties
as the Holders' Representative. All decisions and actions by the Holders'
Representative will be binding upon all of the Shareholders and no Shareholder
will have the right to object, dissent, protest or otherwise contest the same.
You will not have any cause of action against the Corporation for any actions
taken by the Corporation in reliance upon the instructions or decisions of the
Holders' Representative.
LISTING OF SHARES
As a result of the disposition of all of the Trust's real estate investments,
the AMEX halted trading in the Shares at the close of business on July 10, 1998
and subsequently delisted the Shares on October 29, 1998. See "--Information
Regarding the Parties--Property Capital Trust." The Trust is now traded on
NASDAQ's over-the-counter Bulletin Board (symbol "PCTG"). At the current time,
the Corporation does not intend to seek an additional listing application for
the shares of Corporation Common Stock to be issued in connection with the
Merger and does not expect to be listed on the AMEX in the near future. See
"MARKET PRICES AND CASH DIVIDENDS INFORMATION."
REGULATORY APPROVALS
Other than the Commission's review of this Proxy Statement/Prospectus and the
filing of the Articles of Merger with the State of Maryland and with The
Commonwealth of Massachusetts, neither the Trust nor the Corporation believes
that any filing with or approval of any governmental authority is necessary in
connection with the consummation of the Merger.
RELATED TRANSACTIONS
The following describes a series of related transactions that will be
consummated immediately upon consummation of the Merger:
1. Simultaneously with the execution of the Merger Agreement, the Trust, the
Corporation and FYA executed the Investment Agreement, dated June 18, 1998, as
amended. Under the terms of this agreement, immediately following consummation
of the Merger, FYA will contribute $1 million in cash, which FYA will borrow,
to the Corporation in exchange for approximately 319,489 shares of newly issued
Corporation Common Stock. Immediately thereafter, FYA will distribute the
Corporation Common Stock to its partners based on their pro rata percentage
interests in FYA. As a result, the partners of FYA will own approximately 66.7%
of the outstanding shares of Corporation Common Stock. Upon consummation of the
Merger, the Shareholders of the Trust will own the remainder of the outstanding
shares of Corporation Common Stock.
2. The Corporation will contribute this $1 million to the Operating
Partnership in exchange for 319,489 Common Units of the Operating Partnership.
The Corporation, in its capacity as general partner of the Operating
Partnership, expects to use this $1 million to pay the costs of the Merger and
the Related Transactions.
3. PCT LP, pursuant to a Contribution and Merger Agreement, dated October 16,
1998, by and between FYA and PCT LP, will merge into FYA. As a result PCT LP
will cease to exist, and the former partners of
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<PAGE>
FYA will receive certain Units of the Operating Partnership. See "THE
CORPORATION--The Operating Partnership." Immediately following such merger, FYA
will change its name to "Property Capital Trust Limited Partnership" and become
the Operating Partnership. The Corporation through its pre-merger interest in
PCT LP will own approximately a 32.3% common limited partnership interest in
the Operating Partnership, and will serve as the general partner of the
Operating Partnership with a 1% general partnership interest. The estimated
fair market value of the assets of the Operating Partnership immediately prior
to the consummation of the Related Transactions will be approximately $4
million. None of the assets of the Operating Partnership or the Corporation
were owned by the Trust prior to the Merger. See "PRO FORMA FINANCIALS FOR
MARYLAND PROPERTY CAPITAL TRUST, INC."
Upon completion of the Merger and the Related Transactions, the present
Shareholders of the Trust will have a minority interest in the Corporation,
which will have a minority interest in the Operating Partnership, subject to
certain preferred partnership interests in the Operating Partnership. See "THE
CORPORATION--The Operating Partnership."
ACCOUNTING TREATMENT
As a result of the Merger and the Related Transactions the partners of FYA
will own 66.7% of the Corporation Common Stock and certain partners of FYA will
control the Board of Directors of the Corporation. In addition, the Corporation
will be the sole general partner of the Operating Partnership. As such, for
financial reporting purposes, the Merger and Related Transactions will be
accounted for as a reverse acquisition of the Corporation and the Trust by FYA.
DISSENTERS' RIGHTS
You are not entitled to dissenters' rights of appraisal or other dissenters'
rights under either Massachusetts law or Maryland law with respect to the
Merger or any transactions contemplated thereby.
CERTAIN EFFECTS OF THE MERGER
If the proposed Merger is consummated, you will no longer have an equity
interest in the Trust. Instead, you will have the right to receive the merger
consideration described in "--The Merger Consideration" above, and you will
have a minority interest in the Corporation, which has a minority interest in
the Operating Partnership.
As a result of the Merger, all Shares of the Trust will cease to be
outstanding, and will be canceled and retired. You will cease to have any
rights with respect to such Shares except the right to receive the merger
consideration.
23
<PAGE>
THE MERGER AGREEMENT
The following is a summary of the material terms of the Merger Agreement, a
copy of which is attached hereto as Annex A. The summary of the Merger
Agreement contained herein is not a complete description of the terms and
conditions thereof and is qualified in its entirety by reference to the Merger
Agreement. The Trust urges you to review the Merger Agreement carefully.
CONSIDERATION TO BE PAID IN THE MERGER
Upon consummation of the Merger, you will receive: (i) one-sixtieth of a
share of the Corporation Common Stock for each Share you own; and (ii) a
Contingent Payment Right. The Corporation will not issue any fractional shares
of Corporation Common Stock or cash in lieu of the issuance of fractional
shares. The Corporation will issue one share of Corporation Common Stock in
exchange for fractional interest equal to or greater that .5 and no Corporation
Common Stock or cash in lieu thereof in exchange for fractional interests of
less than .5.
As of the Effective Time, the Corporation will deposit with the Exchange
Agent the certificates representing the shares of Corporation Common Stock.
Promptly after the Effective Time, detailed instructions with regard to the
surrender of your Trust Shares Certificates in exchange for the merger
consideration, along with a letter of transmittal, a description of the Escrow
Agreement and any other required documents, shall be sent to you by the
Exchange Agent.
The Corporation Common Stock will be delivered to you as promptly as
practicable following receipt by the Exchange Agent of the relevant Shares
Certificates and all other required documents. Any dividends or other
distributions on Corporation Common Stock will be paid upon the surrender of
the relevant Certificate in exchange for the merger consideration. You will be
entitled to receive the Contingent Payment upon completion of the pending
litigation with the State of Florida. See "THE MERGER--Contingent Payment
Right."
Immediately prior to the consummation of the Merger, the Trustees will
declare and authorize the payment to you of a special dividend in the amount of
approximately $.22 per Share and the redemption price of $.01 per Share. You
will receive this distribution shortly after the consummation of the Merger.
EFFECTIVE TIME
As soon as practicable on the first business day after the satisfaction or
waiver of the conditions to the Merger, the Trust and the Corporation will file
Articles of Merger with the State Department of Assessments and Taxation of
Maryland and the Secretary of the Commonwealth of The Commonwealth of
Massachusetts. The date and time of the acceptance for record of the Articles
of Merger by the State of Maryland will be the Effective Time of the Merger.
GENERAL CONDITIONS TO THE MERGER
The respective obligations of each party to effect the Merger are subject to
the satisfaction or waiver of the following conditions:
(i) the approval of the Merger Agreement by the affirmative vote of the
Shareholders by the requisite vote;
(ii) the approval of the Merger Agreement by the Trust as the sole
stockholder of the Corporation;
(iii) the satisfaction of any obligations of the Trust pursuant to bonus
plans, compensation plans, and other employee benefit plans; and
(iv) the satisfaction of any out-of-pocket expenses incurred by the Trust
in connection with the Merger or the Related Transactions other than
those expenses reimbursable under the Investment Agreement.
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<PAGE>
It is the intention of the Trustees to cause the conditions set forth in
clauses (ii), (iii) and (iv) above to be satisfied to the extent that they have
not already been satisfied.
TERMINATION
The Corporation and the Trust may terminate the Merger Agreement by mutual
written consent at any time prior to the Effective Time. In addition, the
Merger Agreement terminates upon the termination of the Investment Agreement.
Upon the termination of the Merger Agreement, neither party will have any
further rights or obligations pursuant to the Merger Agreement other than with
respect to the payment or retention of certain sums of money as described in
"--Fees and Expenses" below. If the Merger Agreement is terminated and the
Merger is not consummated, the Related Transactions will not be consummated as
the consummation of the Related Transactions is conditional upon the completion
of the Merger.
FEES AND EXPENSES
Except as provided in the Investment Agreement, whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Merger
Agreement and the Related Transactions will be paid by the party incurring such
costs or expenses. Pursuant to the terms of the Investment Agreement, The Beal
Companies LLP paid the Trust an aggregate of $350,000 as a deposit toward
possible liquidated damages that may come due to the Trust. The deposit
includes amounts for reasonable legal and accounting expenses incurred by the
Trust in connection with preparing and filing the Trust's quarterly and annual
reports and financial statements with the Commission in the amount of $40,000
and an amount equal to $9,000 per month for the period from October 1, 1998 to
the closing of the Merger on account of the Trust's expenses. In addition, The
Beal Companies LLP has agreed to pay the legal fees of the Trust in connection
with the Merger up to $150,000.
Under the Investment Agreement, the parties may terminate the Investment
Agreement under the following circumstances and with the payment of the
following termination fees, which, may under certain circumstances, include a
liquidation fee:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------
CIRCUMSTANCES TERMINATION FEE
- ----------------------------------------------------------------------------
by mutual written consent of the the parties shall agree as to the
Trust, the Corporation and FYA use of the deposit
- ----------------------------------------------------------------------------
the Trust may terminate if the the Trust retains the entire
Commission has not cleared this deposit
Proxy Statement/Prospectus by the
later of : (i) January 11, 1999,
(ii) if the Commission did not
deliver its first round of comments
until after 30 days following the
date of initial filing of this
Proxy Statement/Prospectus, then a
number of days after January 11,
1999 equal to the number of days
over 30 that elapsed after the
initial filing before the parties
received the first round of
Commission comments, or (iii) if
the Commission delivers more than a
single round of comments, then
February 1, 1999
- ----------------------------------------------------------------------------
FYA may terminate if the the Trust must return to The Beal
Shareholders have not approved the Companies LLP the deposit minus (x)
Merger and the Merger Agreement by the sum of $40,000 (the approximate
the 60th day after the Trust mails cost of legal and accounting
this Proxy Statements/Prospectus to services for preparing the Trust's
you third quarter Form 10-Q, Form 10-K
and 1998 certified financial
statements) and (y) an amount equal
to $9,000 per month, prorated on a
daily basis, for each month that
elapses between October 1, 1998 and
the effective date of termination
- ----------------------------------------------------------------------------
</TABLE>
25
<PAGE>
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------
the Trust may terminate if (i) the the Trust retains the entire
Trust has satisfied its conditions deposit
to the closing of the transactions
and (ii) FYA has failed to
consummate the Related Transactions
by the end of the fourth (4th)
business day after the issuance of
the Corporation Common Stock and
the Shareholders have approved the
Merger Agreement
- ----------------------------------------------------------------------------
FYA may terminate if (i) the Trust the Trust must return to The Beal
fails to satisfy its conditions to Companies LLP the deposit minus (x)
closing the transactions by the end the sum of $40,000 (the approximate
of the fourth (4th) business day cost of legal and accounting
after the issuance of the services for preparing the Trust's
Corporation Common Stock and the third quarter Form 10-Q, Form 10-K
Shareholders have approved the and 1998 certified financial
Merger Agreement, (ii) FYA has statements) and (y) an amount equal
satisfied its conditions to closing to $9,000 per month, prorated on a
the transaction and the Trust has daily basis, for each month that
failed to consummate the Related elapses between October 1, 1998 and
Transactions by the end of the the effective date of termination,
fourth (4th) business day after the plus the Trust must pay FYA an
issuance of the Corporation Common additional $250,000
Stock and the Shareholders have
approved the Merger Agreement or
(iii) the Trust has failed to
comply in good faith with its
covenants and agreements
- ----------------------------------------------------------------------------
</TABLE>
The Trust will bear the costs of the Special Meeting and of soliciting
proxies. The Trust will reimburse banks, brokers, custodians and other
fiduciaries who hold Shares in their name or custody, or in the name of
nominees for others, for their out-of-pocket expenses incurred in forwarding
copies of the proxy materials to those persons for whom they hold such Shares.
The Trust has engaged Innisfree M&A Incorporated to assist it in the
solicitation of proxies and to provide various proxy services for the Trust in
connection with the Special Meeting at a cost of approximately $7,500 plus
reasonable out-of-pocket expenses. See "THE SPECIAL MEETING--Record Date;
Solicitation of Proxies."
EXCULPATION
Pursuant to the Merger Agreement, the Trust and the Corporation have agreed
that the obligations of the Trust under the Merger Agreement and in connection
with the Related Transactions do not and will not constitute personal
obligations of the Trustees, officers, employees or Shareholders of the Trust
and will not involve any claim against or personal liability on the part of any
of them. The Trust and the Corporation have agreed to look only to the assets
of the Trust in respect of any such claim or obligation and not to seek
recourse against the Trustees, officers, employees or Shareholders for
satisfaction of any such claim or obligation.
INDEMNIFICATION
Pursuant to the Merger Agreement, the Trust and the Corporation have agreed
that Charter Documents of the Corporation and the partnership agreement of the
Operating Partnership will provide for the indemnification of the Trustees,
officers, agents, employees and Shareholders (in connection with the affairs of
the Trust) of the Trust for a period of six years from the date of the
Effective Time. Such indemnification shall be no less favorable than the
indemnification provided those persons under the Declaration of Trust as in
effect on the date of the Merger Agreement. The Corporation shall also provide
liability insurance coverage for the Trust's Trustees and officers for a period
of six years from the Effective Time. See "THE MERGER--Interest of Certain
Persons in the Merger."
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted for Trustees, directors, officers or persons controlling the
Trust pursuant to the foregoing provisions, the Trust has been
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<PAGE>
informed that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act, and is therefore
unenforceable.
ARTICLES OF INCORPORATION AND BYLAWS
At the Effective Time, the Articles of Incorporation and the By-laws of the
Corporation, as in effect immediately prior to the Effective Time, will
continue as the Articles of Incorporation and the By-laws of the surviving
entity until duly amended in accordance with applicable law.
MANAGEMENT AFTER THE MERGER
At the Effective Time, the Trust will merge into the Corporation and the
current management of the Corporation will remain unchanged. See "THE
CORPORATION--Board of Directors," and "--Officers."
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<PAGE>
THE CORPORATION
DESCRIPTION OF BUSINESS OF THE CORPORATION
The Corporation is a recently-formed Maryland corporation and, currently, is
wholly-owned by the Trust. After the Merger, the Corporation will continue to
elect to be taxed as a REIT under the Internal Revenue Code. The Operating
Partnership is a recently-formed Massachusetts limited partnership. The
Corporation is the sole general partner of the Operating Partnership. The
Corporation does not own directly any real estate, has not had any operations
prior to the date of this Proxy Statement/Prospectus and has no material net
worth or assets. After the Merger and the Related Transactions, the
Corporation's sole asset will be its approximate 1% general partnership
interest and approximate 32.3% common limited partnership interest in the
Operating Partnership. After the Merger, the Corporation intends to make
regular annual and quarterly reports to its Stockholders as required by the
Exchange Act.
The Corporation initially will rely heavily on the services of The Beal
Companies LLP, Beal Co. and certain executive officers of The Beal Companies
LLP to manage its business. The Beal Companies LLP, founded in 1888, is a
privately held real estate company located in Boston, Massachusetts. It
provides a full compliment of real estate services, including development,
property management, consulting, appraisal, assessment, brokerage and
construction services. The Beal Companies LLP and its principals control a
sizable portfolio of commercial and residential real estate which they have
either developed or acquired. Bruce A. Beal, Robert L. Beal and Michael A.
Manzo, who are officers and directors of the Corporation, will continue as
principals and officers of The Beal Companies LLP. In time, as the Corporation
increases in size and financial strength, the Corporation anticipates that it
will hire additional personnel to assist these individuals. See "RISK FACTORS--
Interests of Certain Directors and Officers of the Corporation and Trustees of
the Trust in the Merger," and "--Dependence on The Beal Companies LLP."
BUSINESS AND GROWTH STRATEGY
The Corporation initially will rely on the experience and knowledge of its
officers and directors to manage its growth, if any. The Corporation believes
that its executive officers have long-standing relationships with institutional
owners, lenders, bankers and other real estate operators and developers which
the Corporation anticipates may provide the Corporation with access to
transaction activity and investment opportunities. In addition, the operating
experience of its executive officers provides a unique perspective that the
Corporation expects to be particularly valuable as the real estate cycle
changes. In addition to the experience gained by the executive officers as
senior management of The Beal Companies LLP, the executive officers have been
active in the development, acquisition and management of a broad spectrum of
property types, including apartment, office, retail and mixed-use projects. See
"RISK FACTORS--Dependence on The Beal Companies LLP."
The Corporation anticipates that it will position itself to produce income
and portfolio growth as the capital markets recover from the current downturn
that began in mid-1998 and as funding for real estate activities becomes more
readily available. Until the Corporation is satisfied that the financial
markets are sufficiently stabilized to allow growth of the Corporation, the
Operating Partnership will be operated with the existing single property and
with all operating expenses maintained at the lowest levels, consistent with
regulatory requirements and other needs. Given appropriate market conditions,
the Corporation intends to pursue growth of the Corporation through a
combination of the (i) acquisition of existing properties, (ii) development of
new properties, (iii) active management of existing properties owned by the
Corporation to improve profitability, (iv) addition of new equity capital and
(v) acquisition of or merger with other real estate companies. In addition, the
Corporation may seek to obtain a credit facility to provide funding to acquire
or develop additional properties. The Corporation believes it can also pursue
growth through the active management of Corporation assets as well as the
redevelopment of some acquired assets for more advantageous uses. The ability
to reposition these assets will be an important aspect of the Corporation's
acquisition criteria. In conjunction with raising new funding and enlarging its
portfolio, the Corporation anticipates that it will increase its personnel as
appropriate to expanded operations. In time, management expects that the
Corporation
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<PAGE>
will provide its own property management services, in-house acquisition staff
and accounting personnel. However, there is no assurance that such growth
activities will occur or that the Corporation will experience any growth in the
future.
Given appropriate market conditions, the Corporation believes that its REIT
structure will allow the Corporation to make tax efficient acquisitions through
the issuance of Units of the Operating Partnership. The Corporation anticipates
that it will seek to acquire high quality, competitively priced properties in
markets that seem to be attractive growth areas. Initially, the Corporation
intends to focus on the New England market, including the metropolitan areas of
Boston, Massachusetts, Providence, Rhode Island, and Hartford, Connecticut. In
the future, the Corporation intends to evaluate the merits of expanding its
activities to other geographic areas and will depend on the Corporation's
principals, who have combined experience of over 100 years in developing
commercial and residential property in the Boston and surrounding areas, to
make such strategic decisions. The Corporation intends that management will
pursue development opportunities based on these individuals' knowledge of the
local New England real estate markets and at a time when efficient funding for
such activity is available. However, there is no assurance that the Corporation
will be able to capitalize on any such development and acquisition
opportunities or that the Company will experience any growth in the future.
BOARD OF DIRECTORS
The Corporation initially intends to be governed by a three-member Board of
Directors, all of whom will be officers of the Corporation and officers and
principals of The Beal Companies LLP. The Corporation's Articles of
Incorporation provides for a classified Board of Directors. Among other things,
a classified Board of Directors may have an anti-takeover effect. See
"DESCRIPTION OF THE CAPITAL STOCK OF THE CORPORATION--Restrictions on Transfers
of Capital Stock," and "--Anti-Takeover Provisions." Each of the directors will
serve for terms expiring at the annual meeting of Stockholders in the year
indicated below. The directors of the Corporation at and as of the Effective
Time will be:
<TABLE>
<S> <C> <C>
Class I Class II Class III
1999 2000 2001
Bruce A. Beal Robert L. Beal Michael A. Manzo
</TABLE>
Bruce A. Beal is a partner of The Beal Companies LLP, is Chairman of Beal and
Company, Inc. and has served as a director and the President of the Corporation
since its formation. He has been active in the field of real estate and with
The Beal Companies LLP since 1959. Mr. Beal has had extensive involvement in
all phases of real estate development and financing, consulting and appraising
and management. Mr. Beal is actively involved in directing the development and
acquisition activities of The Beal Companies LLP and will perform similar tasks
for the Corporation. In addition, Mr. Beal serves as a director of Americas
Dredging Company, Tweedy Browne Global Funds and Tweedy Brown American Fund.
Robert L. Beal is a partner of The Beal Companies LLP, is President of Beal and
Company, Inc. and has served as a director and the Secretary of the Corporation
since its formation. Prior to 1976, when he joined The Beal Companies LLP, he
was Vice President of The Beacon Companies, investment-builders. He joined The
Beacon Companies in 1965 upon receiving an MBA from The Harvard School of
Business Administration. Mr. Beal serves as a consultant to various private and
publicly held corporations, foreign investors and leading institutions and is
actively involved in developing and appraising real estate of all types. He
will provide similar services to the Corporation.
Michael A. Manzo is a partner of The Beal Companies LLP, is Senior Vice
President of Beal and Company, Inc. and has served as a director and Treasurer
of the Corporation since its formation. He provides supervision of new
construction and rehabilitation, project and acquisition feasibility analysis
and arranges mortgage placements for clients of The Beal Companies LLP. Mr.
Manzo will provide similar services for the
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<PAGE>
Corporation. Prior to joining The Beal Companies LLP in 1975, Mr. Manzo was the
Vice President for Commercial Operations with Spaulding and Slye Corporation, a
national real estate firm based in Boston.
OFFICERS
The officers of the Corporation at and as of the Effective Time will be:
Bruce A. Beal, President
Michael A. Manzo, Treasurer
Robert L. Beal, Secretary
EXECUTIVE COMPENSATION
The Corporation anticipates that the officers and directors of the
Corporation will receive nominal salaries and fees in exchange for their
services to the Corporation so that the Corporation's expenses may be
maintained at a level not to exceed the cash flow from its start-up portfolio.
However, if the portfolio holdings of the Corporation increase, then the
Corporation intends to reevaluate and, potentially, restructure the
compensation to its officers and directors.
DESCRIPTION OF PROPERTY
General Description. Initially, the sole real estate asset of the Operating
Partnership will be the property located at 51 New York Avenue, Framingham,
Massachusetts. Beal Co. will be the manager of this property. This property
consists of approximately 1.1 acres of land improved by a one story combined
office and research and development building of 17,250 square feet of rentable
space. The building was originally constructed in 1969. FYA originally acquired
this property in 1985 and undertook a major renovation of the building over the
following two years.
Leasing. The building on this property is currently leased to Genzyme
Corporation for a term which expires in September 2005. The tenant has two
options to extend the lease for an additional term of five years each. The
current annual rent is $357,000 ($20.70 per square foot). If the tenant
exercises the extension options, then annual base rent would be subject to
escalation based on formulas summarized as follows:
<TABLE>
<CAPTION>
PERIOD ANNUAL BASE RENT
- ---------------------------------------------------------------------------------------
<S> <C>
October 2000 through September 2003 $357,000
- ---------------------------------------------------------------------------------------
October 2003 through September 2005 greater of $357,000 or $357,000 adjusted by
an inflation index
- ---------------------------------------------------------------------------------------
October 2005 through September 2010 appraised fair market rent, but not less
than rent for previous year
- ---------------------------------------------------------------------------------------
October 2010 through September 2015 appraised fair market rent, but not less
than rent for previous year
</TABLE>
The tenant is responsible for payment of operating expenses including real
estate taxes, property and casualty insurance, and all maintenance expenses
(including structural, mechanical systems and capital improvements). During the
last three years of the term of the lease, the responsibility for capital
improvements and replacements shifts to the landlord.
Financing. In connection with the purchase of Corporation Common Stock by FYA
immediately prior to the merger of PCT LP into FYA, FYA will place a mortgage
financing of $1.0 million on this property. FYA anticipates that the debt will
have a term of three years, will bear interest at LIBOR rate plus two percent
and will be collateralized by the property. FYA will contribute the proceeds of
this debt to the Corporation in exchange for shares of Corporation Common
Stock. See "THE MERGER--Related Transactions."
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<PAGE>
LEGAL PROCEEDINGS
The Corporation is not currently involved in any legal proceedings.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
THE OPERATING PARTNERSHIP
Management. The Corporation will be the sole general partner of the Operating
Partnership. Initially, Beal Co. will provide property management services to
the Operating Partnership. See "--Management Agreement." However, in time, if
the Operating Partnership experiences any growth, the Corporation anticipates
that the Operating Partnership will become a self-managed real estate operating
company. That is, the Operating Partnership will not pay management, leasing
and disposition fees (other than potentially commission fees) to a third party,
but will use the efforts of the executive officers of the Corporation to manage
its real estate investments. See "--Description of Business of the
Corporation," and "--Business and Growth Strategy."
Management Agreement. The Operating Partnership expects to execute
simultaneously with the consummation of the Related Transactions a property
management agreement with Beal Co. The Operating Partnership anticipates that
the terms of such management agreement will be substantially as follows.
Beal Co. will operate, maintain and manage the property located at 51 New
York Avenue, Framingham, Massachusetts, the sole asset of the Operating
Partnership after consummation of the Related Transactions. In exchange, the
Operating Partnership will pay Beal Co. a management fee equal to three percent
(3%) of gross receipts (as defined in the management agreement). In addition,
Beal Co. will be entitled to receive a leasing fee (at the time a new lease or
an extension of an existing lease with the tenant of the property is executed)
based upon the annual base rent payable pursuant to a newly executed lease or
an extended lease with a tenant of the property. Furthermore, the Operating
Partnership may reimburse Beal Co. for certain expenses, including, without
limitation, fees of accountants, legal counsel and data processing. The
Operating Partnership anticipates that Beal Co. will provide accounting
services on an as needed basis and Beal Co. will charge the Operating
Partnership on a per hour basis at rates appropriate to the personnel providing
such accounting services.
The Operating Partnership will have the right to terminate the management
agreement with or without cause by giving Beal Co. at least thirty (30) days
prior written notice. Beal Co. will have the right to terminate the management
agreement at any time with or without cause with at least sixty (60) days prior
written notice.
Issuance of Units. In connection with the merger of PCT LP into FYA, the
partners of FYA will receive, in exchange for their partnership interests in
FYA, a partnership interest in the Operating Partnership. Partnership interests
in the Operating Partnership will be in the form of uncertificated "units" of
limited partnership interest ("Units"). The Operating Partnership will issue
three types of Units:
Class A Preferred Units. The Class A Preferred Units will be non-convertible,
non-participating, cumulative, redeemable Units and will be held only by the
former partners of FYA who are not affiliated with Messrs. Beal (the "Non-Beal
Limited Partners"). With respect to cash from operations, the holders of the
Class A Preferred Units will first receive all cash from operations out of the
Operating Partnership until such holders receive an aggregate of $146,544 per
year. If distributions do not equal such amount, the difference will be carried
over until the following year. No other Unit holders will receive any
distributions until the holders of the Class A Preferred Units have received
their preferred distributions (including any carry-over). In addition, if the
rental income from the property is less than $357,000 per year, then the
Operating Partnership will decrease distributions to the holders of the Class A
Preferred Units in proportion to the amount by which the rental income actually
received from the property is less than $357,000. Upon a liquidation or sale of
the
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<PAGE>
Corporation or the Operating Partnership, the holders of the Class A Preferred
Units will receive, after payment and discharge of all debts and liabilities to
the creditors, the general partner and the other partners of the Operating
Partnership, from the proceeds of such liquidation or sale an aggregate of
$2,787,653. This amount represents the preference amount of the holders of
Class A Preferred Units based on the value of the property at the time of the
Related Transactions. The Class A Preferred Units will be redeemable at any
time by the Operating Partnership at a price equal to the liquidation
preference plus any unpaid priority distributions.
Class B Preferred Units. Class B Preferred Units will also be non-
convertible, non-participating, cumulative, redeemable Units, but will be held
only by the former partners of FYA who are affiliated with Messrs. Beal (the
"Beal Limited Partners"). Once the holders of the Class A Preferred Units have
received their preferred distributions, the holders of the Class B Preferred
Units will receive cash from operations out of the Operating Partnership until
such holders receive an aggregate of $143,456 per year. In addition, if the
rental income from the property is less than $357,000 per year, then the
Operating Partnership will decrease distributions to the holders of the Class B
Preferred Units in proportion to the amount by which the rental income actually
received from the property is less than $357,000. Upon a liquidation or sale of
the Corporation or the Operating Partnership, once the holders of the Class A
Preferred Units have received their preferred distributions, the holders of the
Class B Preferred Units will receive from the proceeds of such liquidation or
sale an aggregate of $212,347. This amount represents the preference amount of
the holders of the Class B Preferred Units based on the value of the property
at the time of the Related Transactions. The Class B Preferred Units will be
redeemable at any time by the Operating Partnership at a price equal to the
liquidation preference plus any unpaid priority distributions; provided,
however, that unless all of the Series A Preferred Units have been redeemed, no
Series B Preferred Units may be redeemed.
Common Units. Upon the consummation of the merger of PCT LP into FYA, all the
partners of FYA will receive Common Units based on their percentage interests
in FYA. In addition, the Corporation will contribute to the Operating
Partnership the $1 million in cash it receives from FYA in exchange for Common
Units. Only after the holders of both the Class A and Class B Preferred Units
have received their preferred distributions will the Common Unit holders
(including the Corporation) receive distributions out of cash flow from
operations. In addition, only after the holders of both the Class A and Class B
Preferred Units receive their preferred distributions, will the holders of
Common Units (including the Corporation) receive any distributions upon the
liquidation or sale of the Corporation or the Operating Partnership. Currently,
because of the priority distributions to the holders of Class A and Class B
Preferred Units, the Operating Partnership does not anticipate having
sufficient cash flows from operations to make any distributions to the Common
Unit holders in the near future. In the future, the Operating Partnership may
be able to make distributions to the Corporation. However, such ability will be
entirely dependent on whether and when the Operating Partnership acquires
additional assets and whether or not the Operating Partnership issues
additional Units. Twelve months after the closing of the Related Transactions,
the Operating Partnership may be obligated to redeem each Common Unit at the
request of the holder thereof. See "--The Partnership Agreement of the
Operating Partnership--Redemption of Common Units."
Assets and Liabilities. In addition to acquiring all of the assets and
liabilities of FYA, the Operating Partnership may, at or following the closing
of the Related Transactions, acquire in exchange for cash or Units, other
properties from affiliates of The Beal Companies LLP or from third parties.
However, upon completion of the Related Transactions the assets and liabilities
of the Operating Partnership will be as follows:
(i) The assets: 51 New York Avenue, Framingham, Massachusetts.
(ii) The liabilities: $1 million mortgage debt, which FYA will use to
purchase shares of Corporation Common Stock.
(iii) The equity: the value of the assets (described in clause (i) above)
minus the value of the liabilities (described in clause (ii) above).
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<PAGE>
THE PARTNERSHIP AGREEMENT OF THE OPERATING PARTNERSHIP
The General Partner. The Corporation will be the sole general partner of the
Operating Partnership. The partnership agreement of the Operating Partnership
will provide that the limited partners of the Operating Partnership will not
have any rights with respect to the management of the Operating Partnership.
Exculpation; Indemnification. The partnership agreement will generally
provide that the Corporation will incur no liability to the Operating
Partnership or any limited partner of the Operating Partnership for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the Corporation carried out its duties in good faith. In
addition, the Corporation will not be responsible for any misconduct or
negligence on the part of its agents, provided the Corporation appointed such
agents in good faith. The Corporation may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisors, and any action it takes or omits to take in reliance
upon the opinion of such persons, as to matters that the Corporation reasonably
believes to be within their professional or expert competence, shall be
conclusively presumed to have been done or omitted in good faith and in
accordance with such opinion. The partnership agreement will contain an express
acknowledgment by the limited partners of the Operating Partnership that the
Corporation will be under no obligation to consider the separate interests of
such limited partners in connection with its decisions, provided that the
Corporation has acted in good faith.
The partnership agreement will also provide for indemnification of the
Corporation, the directors and officers of the Corporation, and such other
persons as the Corporation may from time to time designate, against any
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by such person in connection with any of the preceding unless it is
established that: (1) the act or omission of the indemnified person was
material to the matter giving rise to the preceding and either was committed in
bad faith or was the result of active and deliberate dishonesty; (2) the
indemnified person actually received an improper personal benefit in money,
property or services, or (3) in the case of any criminal proceeding, the
indemnified person had reasonable cause to believe that the act or omission was
unlawful.
Redemption of Common Units. Twelve months after the closing of the Related
Transactions, the Operating Partnership may be obligated to redeem each Common
Unit at the request of the holder thereof for cash equal to the fair market
value of one share of Corporation Common Stock at the time of such redemption
(as determined in accordance with the provisions of the partnership agreement).
However, the Corporation, as general partner of the Operating Partnership, may
elect to acquire any such Common Unit presented for redemption for one share of
Corporation Common Stock or an amount of cash of the same value. The
Corporation will likely elect to issue Corporation Common Stock in connection
with each such redemption rather than pay cash. Therefore, your interests in
the Corporation will be diluted by the issuance of Corporation Common Stock in
connection with a redemption. Further, with each redemption or acquisition by
the Corporation of Common Units, the Corporation's percentage ownership
interest in the Operating Partnership will increase.
Issuance of Additional Units. The Corporation will be authorized, without the
consent of the limited partners, to cause the Operating Partnership to issue
additional Common Units (as well as additional partnership interests in
different series or classes, which may be senior to the Common Units) to
itself, to the limited partners or to other persons for such consideration and
on such terms and conditions as the Corporation deems appropriate.
Consideration for additional partnership interests may be cash or other
property or assets. No limited partner has preemptive, preferential or similar
rights with respect to additional capital contributions to the Operating
Partnership or the issuance or sale of any partnership interests therein.
Lock-Up. The holders of Units may not transfer their Units for a period of
one year from the date of issuance.
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<PAGE>
FEDERAL INCOME TAX CONSEQUENCES TO SHAREHOLDERS
The following describes the material U.S. federal income tax consequences of
the Merger to Shareholders who receive the merger consideration. This
discussion does not address all aspects of taxation that may be relevant to you
in light of your personal investment or tax circumstances or to certain types
of Shareholders (including insurance companies, financial institutions, broker-
dealers, tax-exempt entities, foreign corporations and persons who are not
citizens or residents of the United States) subject to special treatment under
the federal income tax laws, nor does it give a detailed discussion of any
state, local or foreign tax considerations. THE TRUST URGES YOU TO CONSULT WITH
YOUR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER,
INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO
YOU OF THE MERGER.
This discussion assumes that the Trust qualifies for taxation as a REIT in
the year of the Merger and does not address any aspects of U.S. federal income
taxation to the Trust relating to its election to be taxed as a REIT.
This discussion is based on the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Department of Treasury regulations ("Treasury
Regulations"), judicial authority and administrative rulings and practice, all
as of the date of this Proxy Statement. There can be no assurance that future
legislative, judicial or administrative changes or interpretations will not
adversely affect the accuracy of the statements and conclusions set forth
herein. Any such changes or interpretations could be applied retroactively and
could affect the tax consequences of the Merger to the Shareholders.
GENERAL
The U.S. federal income tax consequences of the Merger are uncertain. The
Merger may qualify as a reorganization described in Section 368(a)(1)(F) of the
Code. Assuming the Merger so qualifies and, as described below, the Contingent
Payment Right is treated separately, you will not recognize gain or loss with
respect to the receipt of Corporation Common Stock in exchange for Shares of
the Trust. The tax basis of Corporation Common Stock received by you in the
Merger will be equal to the tax basis of the Shares exchanged therefor and the
holding period for such Corporation Common Stock will include the holding
period of the Shares exchanged therefor, assuming such Shares are held as a
capital asset at the Effective Time.
If the Merger does not qualify as a reorganization, you will recognize gain
or loss with respect to the receipt of Corporation Common Stock in exchange for
Shares of the Trust equal to the difference, if any, between your adjusted tax
basis in your Shares of the Trust and the value of (i) the Corporation Common
Stock received in exchange therefor and (ii) the Contingent Payment Right you
receive. The Corporation Common Stock will not have significant, if any,
present value and the value of the Contingent Payment Right is speculative.
Assuming the Merger qualifies as a reorganization, although it is not free
from doubt, the receipt by you of the Contingent Payment Right should be
treated separately for federal income tax purposes as a distribution to you in
the amount of the fair market value of the Contingent Payment Right. If the
Merger qualifies as a reorganization and the Contingent Payment Right is not
treated separately, you will recognize gain, if any, but not loss, on the
exchange to the extent of the value of the Contingent Payment Right, which
value is speculative. In such case, if receipt of the Contingent Payment Right
has the effect of a dividend, you will be treated as having received a dividend
to the extent of your ratable share of the undistributed earnings and profits
of the Trust, up to the amount of gain recognized. If the Merger does not
qualify as a reorganization, the receipt by you of the Contingent Payment Right
may be treated as a liquidating distribution by the Trust.
Distributions from the Trust, other than capital gain dividends, discussed
below, are taxable as ordinary income dividend to the extent of the current and
accumulated earnings and profits of the Trust. For this purpose, current
earnings and profits include earnings and profits for the entire taxable year
of the Trust in
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<PAGE>
which the Contingent Payment Right is distributed, including that portion of
the taxable year following the Merger. Such distributions are not eligible for
the dividends-received deduction for corporations. To the extent that a
distribution from the Trust exceeds the current and accumulated earnings and
profits of the Trust, the distribution is first treated as a tax-free return of
capital, reducing your tax basis in the Shares, then as gain realized from the
sale of such Shares.
Dividends that are properly designated by the Trust as capital gains
dividends are treated as long-term capital gain (to the extent they do not
exceed the Trust's actual net capital gain) for the taxable year without regard
to the period for which Shares have been held by you. Corporate Shareholders,
however, may be required to treat up to 20% of certain capital gain dividends
as ordinary income. Capital gain dividends are not eligible for the dividends-
received deduction for corporations.
It is not clear whether the Trust will be able to designate the distribution
of the Contingent Payment Right as a capital gain dividend, or the extent to
which the distribution of the Contingent Payment Right will be treated, with
respect to a particular Shareholder, as a tax-free return of capital or as gain
realized from the sale of Shares.
As a distribution from the Trust, the Contingent Payment Right will not be
treated as passive activity income and, therefore, you will not be able to
apply any "passive losses" against such income. The receipt of the Contingent
Payment Right will be treated as investment income for purposes of the
investment interest limitation.
SPECIAL TAX CONSIDERATIONS FOR FOREIGN SHAREHOLDERS
The rules governing U.S. federal income taxation of Shareholders who are non-
resident alien individuals, foreign corporations, foreign partnerships, and
foreign trusts and estates (collectively, "Foreign Shareholders") are complex,
and the following discussion is intended only as a summary of such rules.
Foreign Shareholders should consult with their own tax advisors to determine
the impact of federal, state and local income tax laws, including any reporting
requirements, on a receipt of Corporation Common Stock, cash in exchange for
any fractional interests and the Contingent Payment Right, as well as the tax
treatment of such receipt under their home country laws.
In general, Foreign Shareholders are subject to U.S. federal income tax with
respect to their investment in the Trust if such investment is "effectively
connected" with the Foreign Shareholder's conduct of a trade or business in the
United States. A corporate Foreign Shareholder who receives income that is (or
is treated as) effectively connected with a U.S. trade or business also may be
subject to the branch profits tax under Section 884 of the Code, which is
payable in addition to U.S. corporate income tax. Except as noted, the
following discussion applies to Foreign Shareholders whose investment in the
Trust is not so effectively connected.
As described above, the fair market value of the Contingent Payment Right
will be treated as an ordinary dividend distribution to the extent of current
or accumulated earnings and profits of the Trust. An ordinary income dividend
is subject to a U.S. withholding tax equal to 30% of the gross amount of the
distribution unless such tax is reduced or eliminated by an applicable tax
treaty. The Corporation (as successor to the Trust) expects to withhold U.S.
income tax on the gross amount of the fair market value of the Contingent
Payment Right paid to a Foreign Shareholder unless (i) a lower treaty rate
applies and the required form evidencing eligibility for such reduced rate is
filed with the Trust, or (ii) the Foreign Shareholder files an IRS Form 4224
with the Trust, claiming that the distribution is "effectively connected"
income.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING TAX
The following discussion applies only to U.S. Shareholders. As used herein,
the term "U.S. Shareholders" refers to Shareholders who are (i) individuals who
are citizens or residents of the United States, (ii) corporations or
partnerships created or organized in or under the laws of the United States or
any state thereof,
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(iii) an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or (iv) a trust if a court within the United States
is able to exercise primary supervision over the administration of the trust
and one or more U.S. persons have the authority to control all substantial
decisions of the trust. Additional issues may arise pertaining to information
reporting and backup withholding with respect to Foreign Shareholders. Foreign
Shareholders should consult their tax advisors with respect to any such
information reporting and backup withholding requirements.
The Corporation (as successor to the Trust) will report to its U.S.
Shareholders and the Internal Revenue Service (the "Service") the amount of the
fair market value of the Contingent Payment Right and the amount of tax
withheld thereon, if any. Backup withholding at a rate of 31% will apply to the
Contingent Payment Right only if the U.S. Shareholder (i) fails to furnish its
taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii)
is notified by the Service that it has failed properly to report payments of
interest and dividends, or (iv) under certain circumstances, fails to certify,
under penalty of perjury, that it has furnished a correct TIN and has not been
notified by the Service that it is subject to backup withholding for failure to
report interest and dividend payments. Backup withholding will not apply with
respect to payments made to certain exempt recipients, such as corporations and
tax-exempt organizations. U.S. Shareholders should consult their own tax
advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining such an exemption. Backup withholding is not an
additional tax. Rather, the amount of any backup withholding with respect to a
payment to a U.S. Shareholder will be allowed as a credit against such U.S.
Shareholder's U.S. federal income tax liability, provided that the required
information is furnished to the Service.
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COMPARISON OF SHAREHOLDERS' RIGHTS
The following is a summary of the material differences between the provisions
of the Maryland General Corporation Law (the "MGCL") and the Massachusetts
General Law (the "MGL") and the Charter Documents of the Corporation and the
Declaration of Trust (collectively, the "Governing Instruments") that will
result in changes in your rights. Upon consummation of the Merger, you will
become a Stockholder of the Corporation. Differences between the provisions of
the MGCL and the MGL, and the Governing Instruments of the respective
companies, will result in several changes in your rights. It is not practical
to summarize all such changes here or to cover all of the respects in which
Maryland law may differ from Massachusetts law. You are advised to review the
Corporation's Charter Documents and the Declaration of Trust, which are
available as described under "Available Information." The Trust's Declaration
of Trust is summarized below under the caption "The Trust" and the
Corporation's Charter Documents are summarized below under the caption "The
Corporation." The Corporation believes that the provisions contained in the
Charter Documents are comparable to those contained in the constituent
documents of publicly-traded REITs.
The following defined terms apply to this discussion of Massachusetts law and
the Declaration of Trust: "Independent Trustees" means the Trustees who are not
directors, officers, employees, partners, or trustees of the Investment Adviser
or an affiliate of the Investment Adviser, and no one of any such majority
shall individually be the holder of one percent (1%) of any class of securities
of the Investment Adviser or affiliate of the Investment Adviser directly, or
indirectly through any members of his immediate family or through a corporation
or entity in which such Trustee shall own an equity interest of ten percent
(10%) or more; the term "affiliate" shall mean as to any corporation,
partnership or trust, any person who holds beneficially, directly or
indirectly, one percent (1%) or more of the outstanding capital stock, shares
or equity interests of such corporation, partnership or trust, or is an
officer, director, employee, partner or trustee of such corporation,
partnership or trust or of any person which controls, is controlled by, or
under common control with, such corporation, partnership or trust and any
person which controls, is controlled by, or under common control with, such
corporation, partnership or trust. The Trust no longer has an Investment
Adviser.
BOARD OF TRUSTEES AND BOARD OF DIRECTORS
The Trust. The Declaration of Trust provides that a Board of Trustees which
consists of at least three but not more than nine persons, and at least a
majority of the Board must be Independent Trustees, will govern the Trust. The
Trustees hold office until their respective successors are elected and
qualified. The vote or consent of two-thirds of the outstanding Shares or the
vote of two-thirds of the Trustees then in office is required to remove a
Trustee either with or without cause.
The Declaration of Trust requires that vacancies on the Board and newly
created trusteeships be filled by the vote of a majority of Trustees in office,
even if less than a quorum.
The Corporation. The Charter Documents provide that the Corporation is to be
governed by an initial Board of Directors consisting of three persons.
Thereafter, the number of directors may be increased or decreased by a
resolution of the Board of Directors, but the Board of Directors must consist
of a minimum of three persons. In addition, the Board of Directors is a
classified board, divided into three classes with the term of office of one
class expiring each year. The Directors hold office until their successors are
duly elected and qualified or until their earlier resignation or removal.
The Corporation's Articles of Incorporation provide that a director may be
removed only for "cause" and only by the affirmative vote of a majority of the
shares then entitled to vote. The Articles of Incorporation require that,
subject to the rights of holders of shares of any class or series of stock,
vacancies on the Board of Directors, except those resulting from the removal of
a director for "cause" or from the increase in the number of directors, may be
filled by the vote of a majority of the remaining directors, even if less than
a quorum. A vote of a majority of the Stockholders of the Corporation is
required to fill a vacancy on the Board of Directors
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resulting from removal of a director for "cause." A new directorship resulting
from an increase in the number of directors may be filled by a vote of the
entire Board of Directors.
DISTRIBUTION TO SHAREHOLDERS
The Trust. The Board of Trustees has complete discretion in choosing whether
and to what extent Shareholders will receive dividends.
The Corporation. The Directors may from time to time authorize, declare and
pay to Stockholders dividends or distributions and such dividends or
distributions will be in the complete discretion of the Directors. The
Corporation will only have sufficient funds to pay to Stockholders dividends or
distributions to the extent it receives distributions from the Operating
Partnership. Due to the fact that certain partners of the Operating Partnership
will be entitled to receive preferred distributions, the Corporation does not
expect to receive distributions from the Operating Partnership in the
foreseeable future.
SHAREHOLDERS' MEETINGS
The Trust. The Declaration of Trust requires that the Trust hold an annual
meeting of Shareholders at such date, time and place as the Trustees determine.
The managing trustee or the president may at any time call a special meeting of
Shareholders. In addition, the Trust may call a special meeting upon the
request of a majority of Trustees or the request of one-fourth of the
outstanding Shares entitled to vote. The Trust must give written notice of any
Shareholder meeting to each Shareholder no less than ten days and no more than
sixty days before the date of the Shareholder meeting. The holders of one-third
of all the outstanding Shares entitled to vote, present in person or
represented by proxy, is necessary for a quorum. Except with respect to matters
on which the Shareholders are specifically given the right to vote by the
Declaration of Trust, no action taken by the Shareholders at any meeting will
in any way bind the Trustees.
The Corporation. The By-laws of the Corporation provide for an annual meeting
of the Stockholders to be held at such date, time and place as shall be
determined by the Board of Directors. The By-laws also provide for special
meetings of Stockholders if (i) an annual meeting of Stockholders has not been
held for a period of thirteen months since the last annual meeting of
Stockholders or (ii) at any time, called by the President, a majority of the
Board of Directors or the Secretary upon the request of a majority of the
Stockholders entitled to vote at such meeting. The Corporation must give
written notice of each annual meeting and any special meeting to Stockholders
no less than 10 days nor more than 90 days before such meeting to each
Stockholder entitled to vote thereat or to each Stockholder otherwise entitled
to such notice. Except as otherwise required, a majority of the outstanding
shares of Corporation Common Stock entitled to vote at the meeting, present in
person or represented by proxy, will constitute a quorum for the transaction of
business.
SHAREHOLDER APPROVAL OF CERTAIN ACTIONS
The Trust. The Board of Trustees, in their discretion, may, at any time, make
amendments to the Declaration of Trust, subject to rescission by a majority of
Shareholders at the next Shareholders' meeting, unless the amendment involves
termination of the Trust, organization of an entity to take over the Trust
property, or sale of all or substantially all of the Trust property (each an
"Extraordinary Event"). In the case of an Extraordinary Event, either (i) the
affirmative vote of two-thirds of the outstanding Shares or (ii) the written
consent of a majority of the Trustees then in office and two-thirds of the
outstanding Shares entitled to vote is required. In connection with the
adoption of the business plan, the Declaration of Trust was amended on December
15, 1995.
The Corporation. Pursuant to the MGCL, a corporation generally cannot
dissolve, amend its articles of incorporation, merge, sell all or substantially
all of its assets, engage in a stock exchange or engage in similar transactions
outside the ordinary course of business unless approved by the affirmative vote
of two-thirds of the outstanding shares of stock entitled to vote on the matter
unless a lesser percentage (but not less than a majority
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of all of the votes to be cast on the matter) is set forth in the Articles of
Incorporation. The Articles of Incorporation provide that such actions, with
the exception of certain amendments to the Articles of Incorporation as
described below, will be valid and effective if authorized by a majority of the
total number of shares of all classes outstanding and entitled to vote thereon.
Amendments to the Articles of Incorporation require the affirmative vote of a
majority of the outstanding shares of each class entitled to vote thereon as a
class and the affirmative vote of a majority of the outstanding shares entitled
to vote on such amendment, voting together as a single class, unless the
amendment affects the Board of Directors. If an amendment affects the Board of
Directors, the affirmative vote of two-thirds of the outstanding shares
entitled to vote thereon as a class and the affirmative vote of two-thirds of
the outstanding shares entitled to vote on such amendment, voting together as a
single class, is required.
Except as otherwise provided by law, a majority of the Directors may amend or
repeal the By-laws.
LIMITATIONS ON DISSENTERS' APPRAISAL RIGHTS
The Trust. The Declaration of Trust contains no provisions entitling any
Shareholder who dissents from any action taken pursuant to authorization of a
majority or any other vote of Shareholders to receive an appraisal and payment
of the fair value for such dissenting Shareholder's Shares. Nor is there any
statute in Massachusetts applicable to common law business trusts that provides
for appraisal rights comparable to the statutory appraisal rights that the
Massachusetts Business Corporation Law does provide to stockholders of
Massachusetts business corporations who dissent from certain stockholder-
approved corporate actions, including merger, sale of substantially all
corporate property, and any charter amendment which adversely affects the
rights of the dissenting stockholder. Until 1991, it was widely believed that
there were no common law dissenters' appraisal rights in Massachusetts. In
1991, however, the Supreme Judicial Court of Massachusetts held that common law
appraisal rights similar to those described in the Massachusetts Business
Corporation Law are available to dissenting minority stockholders of a
Massachusetts trust company (as to which the statutory rights of the
Massachusetts Business Corporation Law do not apply) in a case in which an 85%
controlling stockholder approved a 1-for-2,500 reverse stock split that
converted all minority share interests into an amount of cash that the trial
court determined was not fair and reasonable. The Supreme Judicial Court
acknowledged that, insofar as the stockholders of the trust company were
concerned, "it was, of course, not clear at the time of the reverse stock split
that such a common law appraisal right existed." The Court also distinguished
its decision in a 1975 case in which it had held that there was no common law
appraisal right for dissenting stockholders of a not-for-profit golf club
corporation that had sold all of its property and in which decision the Court
had stated that it is "very dubious whether such a right ever existed in the
absence of statute even with respect to business corporations."
Accordingly, it is not clear under what conditions or with respect to what
possible transactions, if any, common law appraisal rights in Massachusetts
might apply to a common law business trust such as the Trust. However, counsel
to the Trust has advised the Trustees that you will not be entitled to
dissenters' rights of appraisal in connection with the Merger.
The Corporation. So long as the shares of Corporation Common Stock are listed
on a national stock exchange, holders of such shares who dissent from certain
corporate transactions have no right under the MGCL to an appraisal and payment
of the fair value of their shares, except to the limited extent set forth below
under "--Certain Provisions of Maryland Law--Control Share Acquisitions."
Absent such exception, as a general matter the MGCL provides that a dissenting
stockholder of a Maryland corporation has the right to demand and receive the
fair value of such holder's stock, subject to complying with specified
procedures, if the corporation consolidates or merges with, or exchanges its
shares for shares of, another corporation, or sells substantially all of its
assets, or amends its charter in a way which alters the contract rights
expressly set forth in the charter of any outstanding stock and substantially
adversely affects the stockholder's rights (if the charter does not reserve
such right, which the Articles of Incorporation do).
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LIMITATION OF LIABILITY AND INDEMNIFICATION OF DIRECTORS COMPARED TO TRUSTEES
The Trust. The Declaration of Trust provides that no Trustee, officer, agent
or representative of the Trust shall be personally responsible for any loss or
damage to the Trust's property or to the interests of Shareholders by reason of
any act or omission done or made in good faith. The Declaration of Trust
further provides that the Trust shall fully indemnify each such person and each
Shareholder of the Trust for any personal liability incurred in connection with
the administration, property or affairs of the Trust except liability arising
from such person's own willful breach of trust knowingly and intentionally
committed. The Declaration of Trust also provides that all persons shall look
only to the Trust property for satisfaction of claims of any nature arising in
connection with the affairs of the Trust and that no Shareholder, Trustee,
officer, agent or representative of the Trust shall have any personal liability
in connection with the property or affairs of the Trust.
It is possible that certain states may not recognize the limited liability of
Shareholders of the Trust notwithstanding the provisions in the Declaration of
Trust that Shareholders shall not be subject to any personal liability for the
acts or obligations of the Trust. It is the practice of the Trust to include in
written agreements to which the Trust is a party a provision that the
obligations of the Trust are not enforceable against the Shareholders
personally. No personal liability should attach to the Shareholders under any
agreement containing such provisions. However, in certain states Shareholders
may be held personally liable for claims against the Trust (such as tort
claims, contract claims where the underlying agreement does not specifically
exclude shareholder liability, claims for taxes and other statutory
liabilities) to the extent claims are not satisfied by the Trust. Upon payment
of any such liability, however, the Shareholder will, in the absence of willful
misconduct on the Shareholder's part, be entitled to reimbursement from the
assets of the Trust, to the extent such assets are sufficient to satisfy the
claim. In the 29 years of operation of the Trust, no claim has ever been
asserted against any Shareholder personally for any obligation of the Trust,
and management of the Trust is not aware that any claims have been asserted
personally against any shareholder of any other REIT organized as a business
trust for any obligation of that REIT.
The Corporation. The Charter Documents limit the liability of the
Corporation's directors and officers to the Corporation and its Stockholders to
the fullest extent permitted from time to time by Maryland law. Maryland law
permits the liability of directors and officers to a corporation or its
Stockholders for money damages to be limited, except (i) to the extent that it
is proved that the director or officer actually received an improper benefit or
profit, or (ii) if a court enters a judgment or other final adjudication in a
proceeding based on a finding that the director's or officer's action or
failure to act was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. This provision
does not limit the ability of the Corporation or its Stockholders to obtain
other relief, such as an injunction or restriction.
The Corporation's By-laws require the Corporation to indemnify its directors,
officers and certain other parties to the fullest extent permitted from time to
time by Maryland law. The MGCL permits a corporation to indemnify its
directors, officers and certain other parties against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service to or at the request of the corporation, unless it is established
that the act or omission of the indemnified party was material to the matter
giving rise to the proceeding and (i) the act or omission was committed in bad
faith or was the result of active and deliberate dishonesty, (ii) the
indemnified party actually received an improper personal benefit, or (iii) in
the case of any criminal proceeding, the indemnified party had reasonable cause
to believe that the act or omission was unlawful. It is the position of the
Commission that indemnification of directors and officers for liabilities
arising under the Securities Act is against public policy and in unenforceable
pursuant to Section 14 of the Securities Act.
CERTAIN PROVISIONS OF MARYLAND LAW
The following summary of certain provisions of Maryland law does not purport
to be complete and is qualified in its entirety by reference to Maryland law.
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Business Combinations. Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the voting power of the corporation's shares or an affiliate of
the corporation who, at any time within the two-year period prior to the date
in question, was the beneficial owner of 10% or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate thereof are prohibited for five years after the most recent
date on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, any such business combination must be recommended by the board of
directors of the corporation and approved by the affirmative vote of at least
(a) 80% of the votes entitled to be cast by holders of outstanding voting
shares of the corporation and (b) two-thirds of the votes entitled to be cast
by holders of outstanding voting shares of the corporation other than shares
held by the Interested Stockholder with whom (or with whose affiliate) the
business combination is to be effected, unless, among other conditions, the
corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the same
form as previously paid by the Interested Stockholder for its shares. These
provisions of Maryland law do not apply, however, to business combinations that
are approved or exempted by the board of directors of the corporation prior to
the time that the Interested Stockholder becomes an Interested Stockholder.
The Corporation's Articles of Incorporation contain a provision expressly
electing not to be governed by this provision of the MGCL. There can be no
assurance that this provision will not be amended or eliminated in the future.
Control Share Acquisitions. The MGCL provides that "Control Shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by officers or directors who are employees of the corporation.
"Control Shares" are voting shares of stock that, if aggregated with all other
shares of stock previously acquired by that person, or in respect of which the
acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third, (ii) one-third or more
but less than a majority, or (iii) a majority of all voting power. Control
shares do not include shares the acquiring person is then entitled to vote as a
result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors to call a special meeting of stockholders to
be held within 50 days of demand to consider the voting rights of the shares.
If no request for a meeting is made, the corporation may itself present the
question at any meeting of stockholders.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute,
then, subject to certain conditions and limitation, the corporation may redeem
any or all of the control shares (except those for which voting rights have
previously been approved) for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or of any meeting
of stockholders at which the voting rights of such shares are considered and
not approved. If stockholders approve the voting rights for control shares at a
stockholders meeting and the acquiror becomes entitled to vote a majority of
the shares entitled to vote, all other stockholders may exercise appraisal
rights. The fair value of the shares as determined for purposes of the
appraisal rights might not be less than the highest price per share paid in the
control share acquisition, and certain limitations and restrictions otherwise
applicable to the exercise of dissenters' rights do not apply in the context of
a control share acquisition.
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The control share acquisition statute does not apply to shares acquired in a
merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by a corporation's
articles of incorporation or bylaws.
The Corporation's Articles of Incorporation contain a provision exempting any
and all acquisitions of shares from the control shares provision of the MGCL.
There can be no assurance that this provision will not be amended or eliminated
in the future.
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DESCRIPTION OF THE CAPITAL STOCK OF THE CORPORATION
The description of the stock set forth below does not purport to be complete
and is qualified in its entirety by reference to the Charter Documents. The
Trust urges you to read carefully the Charter Documents which are exhibits to
the registration statement on Form S-4 of the Corporation.
GENERAL
The Corporation has an aggregate of 10,000,000 authorized shares of
Corporation Common Stock, 5,000,000 shares of Preferred Stock (as defined
herein) and 15,000,000 shares of Excess Stock (as defined herein) available for
issuance. The Corporation may, from time to time, issue such shares in the
discretion of the Board of Directors for such consideration as the Board of
Directors deems advisable. No holder of any stock or other securities of the
Corporation will have any preferential or preemptive rights to subscribe for or
purchase any stock or any other securities other than such rights, if any, the
Board of Directors, in its discretion, may fix.
Under Maryland law, stockholders generally are not responsible for a
corporation's debts or obligations. See "COMPARISON OF SHAREHOLDERS' RIGHTS--
Limitation of Liability and Indemnification of Directors Compared to Trustees--
The Corporation."
DESCRIPTION OF PREFERRED STOCK
Under the Articles of Incorporation, the Corporation has authority to issue
up to 5,000,000 shares of preferred stock, par value $.01 per share ("Preferred
Stock" and together with the Corporation Common Stock, the "Equity Stock"),
none of which is outstanding as of the date of this Proxy Statement/Prospectus.
The Corporation may, from time to time, issue Preferred Stock in one or more
series, as authorized by the Board of Directors. Prior to issuance of shares of
any series, the Board of Directors is required by the MGCL and the Articles of
Incorporation to fix for each series the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption. The
Preferred Stock will, when issued against payment therefor, be fully paid and
nonassessable and will not be subject to preemptive rights. The Board of
Directors could authorize the issuance of shares of Preferred Stock with terms
and conditions that could have the effect of discouraging a takeover or other
transaction that holders of Corporation Common Stock might believe to be in
their best interests or in which holders of some, or a majority, of the
Corporation Common Stock might receive a premium for their shares over the then
market price of such Corporation Common Stock.
DESCRIPTION OF COMMON STOCK
Under the Articles of Incorporation, the Corporation has authority to issue
up to 10,000,000 shares of Corporation Common Stock. Subject to the provisions
of the Articles of Incorporation regarding Excess Stock, each outstanding share
of Corporation Common Stock entitles the holder to one vote on all matters
submitted to a vote of Stockholders, including the election of Directors. At
the Effective Time, there will be approximately 479,226 shares of Corporation
Common Stock issued and outstanding.
Subject to the preferential rights of any other shares or series of stock and
to the provisions of the Articles of Incorporation regarding Excess Stock,
holders of shares of Corporation Common Stock are entitled to receive dividends
on Corporation Common Stock if, as and when authorized and declared by the
Board of Directors out of assets legally available therefor, including Excess
Stock. Subject to the provisions of the Articles of Incorporation regarding
Excess Stock, all Corporation Common Stock will have equal dividend,
distribution, liquidation and other rights. Before payment of any dividends or
other distributions, however, the Board of Directors, in its sole discretion,
may set aside a reserve fund for contingencies or for such other purposes as
the Board of Directors determine to be in the best interests of the
Corporation. Subject to the preferential rights of any other shares or series
of stock and to the provisions of the Articles of Incorporation regarding
Excess Stock, holders of shares of Corporation Common Stock are entitled to
share ratably in the assets of the Corporation legally available for
distribution, including Excess Stock, in the event of its
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liquidation, dissolution or winding-up after payment of, or adequate provision
for, all known debts and liabilities of the Corporation and the amount to which
holders of any class of stock classified or reclassified or having a preference
on distributions in liquidation, dissolution or winding-up of the Corporation
have a right.
DESCRIPTION OF EXCESS STOCK
Under the Articles of Incorporation, the Corporation may from time to time
issue such shares of excess stock, $.01 par value per share ("Excess Stock"),
as shall be necessary. See "--Restrictions on Transfer of Capital Stock--
Restrictions Relating to REIT Status." The Excess Stock is not treasury stock,
but rather constitutes a separate class of issued and outstanding stock of the
Corporation.
In the event of any liquidation, or winding up, or any distribution of the
assets of, the Corporation, the holders of Excess Stock are entitled to
receive, ratably with holders of Equity Stock of the class and series converted
into such Excess Stock, such assets available for distribution.
RESTRICTIONS ON OWNERSHIP
For the Corporation to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Corporation in meeting
this requirement, the Corporation may take certain actions to limit the
beneficial ownership, directly or indirectly, by a single person of the
Corporation's outstanding equity securities. See "--Restrictions on Transfers
of Capital Stock" and "--Anti-Takeover Provisions."
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
Restrictions Relating to REIT Status. For the Corporation to qualify as a
REIT under the Code, among other things, not more than 50% in value of its
outstanding capital stock may be owned, directly or indirectly, by five or
fewer individuals (defined in the Code to include certain entities) during the
last half of a taxable year. In addition, 100 or more persons must beneficially
own such capital stock during at least 335 days of a taxable year of 12 months
or during a proportionate part of a shorter taxable year (in each case, other
than the first such year). To assist the Corporation in continuing to remain a
qualified REIT, the Articles of Incorporation, subject to certain exceptions,
provide that no person may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than % (the "Ownership Limit") of the
Equity Stock and no trust or company registered under the Investment Company
Act of 1940 may own, or be deemed to own, more than 15% (the "Look-Through
Ownership Limit") of the Equity Stock. The Board of Directors, in its sole
discretion, may waive the Ownership Limit or the Look-Through Ownership Limit
if evidence satisfactory to the Board of Directors is presented that the
changes in ownership will not then or in the future jeopardize the
Corporation's status as a REIT. In connection with the Related Transactions,
the Corporation will waive the Aggregate Stock Ownership Limit with respect to
the initial Corporation Common Stock ownership of Robert L. Beal, Bruce A. Beal
and their affiliates because none will jeopardize the Corporation's status as a
REIT for Federal income tax purposes. The Corporation also may waive the
Aggregate Stock Ownership Limit with respect to certain other Stockholders, if
appropriate. Any transfer of Equity Stock, or any security convertible into
Equity Stock that would create a direct or indirect ownership of Equity Stock
in excess of the Ownership Limit or the Look-Through Ownership Limit or that
would result in the disqualification of the Corporation as a REIT, including
any transfer that results in the Equity Stock being owned by fewer than 100
persons or results in the Corporation being "closely held" within the meaning
of Section 856(h) of the Code or results in the Corporation's constructive
ownership of a tenant or subsidiary within the meaning of Section 856(d)(2)(B)
of the Code, shall be null and void as to those shares in excess of the
Ownership Limit or the Look-Through Ownership Limit, and the intended
transferee (the "Prohibited Owner") will acquire no rights to such Equity
Stock. The foregoing restrictions on transferability and ownership will not
apply if the Board of Directors determines that it is no longer in the best
interests of the Corporation to attempt to qualify, or to continue to qualify,
as a REIT.
Equity Stock owned, or deemed to be owned, or transferred to a Stockholder in
excess of the Ownership Limit or the Look-Through Ownership Limit, will
automatically be exchanged for an equal number of shares of
44
<PAGE>
Excess Stock that will be transferred, by operation of law, to a trust for the
exclusive benefit of the transferees to whom such capital stock may be
ultimately transferred without violating the Ownership Limit or the Look-
Through Ownership Limit. Upon the conversion of Equity Stock into Excess Stock,
the Corporation will automatically retire and cancel such shares of Equity
Stock. While the Excess Stock is held in trust, it will not be entitled to
vote, and it will not be considered for purposes of any Stockholder vote or the
determination of a quorum for such vote. Each share of Excess Stock will be
entitled to the same dividends and distributions as may be authorized by the
Board of Directors with respect to shares of the class of Equity Stock that
were converted into Excess Stock. The Stockholder, upon demand by the
Corporation, must repay any dividend or distribution paid to the holders of
Excess Stock prior to the discovery by the Corporation that the Stockholder has
transferred the Equity Stock in violation of the provisions of the Articles of
Incorporation.
As soon as practicable after the trust acquires the Excess Stock, the trustee
will sell such shares to a permitted transferee (a "Permitted Transferee").
Prior to such sale, however, the trust shall give the Corporation at least five
days notice of the intended transfer and the Corporation must waive its right
to purchase such shares. Following the sale of Excess Stock to a Permitted
Transferee, the Prohibited Owner of such shares will receive the proceeds of
the sale from the trust. Prohibited Owners are deemed to waive any and all
claims that they may have against the trust except for claims arising out of
gross negligence or willful misconduct. Immediately upon the transfer of the
Excess Stock to a Permitted Transferee, the Corporation will automatically
exchange the Excess Stock for an equal number of shares of Equity Stock of the
class and series from which it was converted originally.
In addition to the foregoing transfer restrictions, the Corporation will have
the right, for a period of 90 days from any event that results in the issuance
of Excess Stock, to purchase all or any portion of the Excess Stock from the
Prohibited Owner for the lesser of (i) the price per share paid for the Equity
Stock in the transaction that created such shares of Excess Stock or (ii) the
market price (as determined in the manner set forth in the Articles of
Incorporation) of the Equity Stock on the date the Corporation exercises its
option to purchase.
Disclosure of Ownership. Each Stockholder of any class of Equity Stock will
upon demand be required to disclose to the Corporation in writing any
information with respect to the direct, indirect and constructive ownership of
Equity Stock as the Board of Directors deems necessary to comply with the
provisions of the Code applicable to REITs, to comply with the requirements of
any taxing authority or governmental agency or to determine any such
compliance.
ANTI-TAKEOVER PROVISIONS
The ownership limitation described above may have the effect of precluding
acquisition of control of the Corporation unless the Board of Directors
determines that maintenance of REIT status is no longer in the best interests
of the Corporation.
The Board of Directors is authorized to classify and reclassify any unissued
Equity Stock by setting or changing, in any one or more respects, the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms or conditions of
redemption of such stock. Such authority includes, without limitation, subject
to the provisions of the Articles of Incorporation, authority to classify or
reclassify any unissued Equity Stock into a class or classes of Preferred
Stock, or Corporation Common Stock or the issuance of any rights plan or
similar plan. In certain circumstances, the issuance of Preferred Stock, or the
exercise by the Board of such rights to classify or reclassify Equity Stock,
could have the effect of deterring individuals or entities from making tender
offers for the Corporation Common Stock or seeking to change incumbent
management. In addition, the Corporation's Board of Directors will be
classified into three distinct classes. This classified board may make it more
difficult for a third party to obtain control of the Corporation unless the
Board of Directors consents.
The MGCL includes certain other provisions that may also discourage a change
in control of management of the Corporation. See "COMPARISON OF SHAREHOLDERS'
RIGHTS--Certain Provisions of Maryland Law."
45
<PAGE>
PRO FORMA FINANCIALS FOR MARYLAND PROPERTY CAPITAL TRUST, INC.
PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
The pro forma condensed consolidated balance sheet of the Corporation as of
September 30, 1998 has been prepared to reflect the Merger and the Related
Transactions, as if each of such transactions and adjustments had occurred on
September 30, 1998. The pro forma condensed statement of operations of the
Corporation for the nine months ended September 30, 1998 and the year ended
December 31, 1997 have been prepared to reflect the transactions and certain
other adjustments, as if such transactions and adjustments had occurred on
January 1, 1997.
In the opinion of management, the pro forma condensed financial information
provides for all adjustments necessary to reflect the effects of the foregoing
transactions and adjustments. The pro forma information is unaudited and is not
necessarily indicative of the combined results that would have occurred if the
transactions and adjustments reflected therein had been consummated on the
dates indicated, or on any particular date in the future, nor does it purport
to represent the financial position, results of operations or changes in cash
flows for future periods.
46
<PAGE>
MARYLAND PROPERTY CAPITAL TRUST, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE
THE PRO FORMA CORPORATION
FYA TRUST ADJUSTMENTS PRO FORMA
------ -------- ----------- -----------
<S> <C> <C> <C> <C>
Assets:
Properties, net......... $1,020 $ -- $ -- $1,020
Cash and cash
equivalents............ 174 3,085 (2,158)(A),(B),(C) 1,101
Deferred rent
receivable............. 325 -- -- 325
Deferred charges........ 28 -- -- 28
Other assets............ -- 8 (8)(A) --
------ -------- -------- ------
Total assets.......... $1,547 $ 3,093 $ (2,166) $2,474
====== ======== ======== ======
Liabilities and
Shareholders' Equity:
Mortgage debt........... $ -- $ -- $ 1,000 (B) $1,000
Accounts payable and
accrued expenses....... 34 523 477 (A),(E) 1,034
Other liabilities....... 11 -- -- 11
------ -------- -------- ------
Total liabilities..... 45 523 1,477 2,045
====== ======== ======== ======
Limited Partners' Interest
in Operating
Partnership.............. -- -- 429 (D) 429
Owners' Equity............ 1,502 -- (1,502)(B),(C),(D) --
Common Stock.............. -- 108,568 (108,563)(A),(B) 5
Paid-in Capital........... -- -- 995 (A),(B) 995
Accumulated Deficit....... -- (105,998) 104,998 (A),(E) (1,000)
------ -------- -------- ------
Total shareholders'
equity............... 1,502 2,570 (3,643) --
------ -------- -------- ------
Total liabilities and
shareholders'
equity............... $1,547 $ 3,093 $ (2,166) $2,474
====== ======== ======== ======
</TABLE>
47
<PAGE>
MARYLAND PROPERTY CAPITAL TRUST, INC.
NOTES TO PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1998
(UNAUDITED)
The Pro Forma Adjustments:
(A) Upon consummation of the Merger of the Trust into the Corporation, a
dividend representing the remaining net assets of the Trust is to be
declared, and will be payable to the Shareholders of the Trust as of the
Effective Time of the Merger. Upon consummation of the Merger, the
Corporation will issue approximately 159,000 shares of Corporation Common
Stock to the Shareholders of the Trust.
(B) To record the new debt of $1,000,000 incurred by FYA. The debt is
anticipated to have a term of three years, will bear interest at LIBOR rate
plus two percent and is to be collateralized by the property owned by FYA.
The proceeds will be used to purchase approximately 319,000 shares of
Corporation Common Stock, which will be distributed to the partners of FYA.
(C) Prior to the consummation of the merger of the partnerships, FYA intends to
distribute cash of approximately $73,000, which represents a portion of the
net working capital of FYA.
(D) To reclassify remaining owners' equity of FYA of approximately $429,000 to
limited partners' interest in the Operating Partnership.
(E) To record the transaction costs of approximately $1,000,000 which is
allocable to the Corporation under the terms of the operation partnership
agreement.
48
<PAGE>
MARYLAND PROPERTY CAPITAL TRUST, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE
THE PRO FORMA CORPORATION
FYA TRUST ADJUSTMENTS PRO FORMA
---- ------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental............................ $233 $2,429 $(2,429)(F) $233
Interest.......................... -- 167 (167)(F) --
Other............................. 4 7 (7) 4
---- ------ ------- ----
Total revenues.................. 237 2,603 (2,603) 237
---- ------ ------- ----
Expenses:
General and administrative........ 25 999 (961)(F),(H) 63
Operating expenses................ -- 210 (210)(F) --
Professional Fees................. -- 6 (6)(F) --
Interest.......................... -- 10 48 (F),(G) 58
Depreciation and amortization..... 23 -- -- 23
---- ------ ------- ----
Total expenses.................. 48 1,225 (1,129) 144
---- ------ ------- ----
Income before Gain on Sale of Real
Estate Investments................. 189 1,378 (1,474) 93
Gain on Sale of Real Estate
Investments........................ -- 4,083 4,083 (F) --
---- ------ ------- ----
Net Income before limited partners'
interest in operating partnership
income............................. 189 5,461 (5,557) 93
Limited partners' interest in
operating partnership income....... -- -- (110)(I) (110)
---- ------ ------- ----
Net income (loss)................... $189 $5,461 $(5,667) $(17)
==== ====== ======= ====
</TABLE>
49
<PAGE>
MARYLAND PROPERTY CAPITAL TRUST, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THE
THE PRO FORMA CORPORATION
FYA TRUST ADJUSTMENTS PRO FORMA
---- ------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental.......................... $311 $13,975 $(13,975)(F) $ 311
Interest........................ 4 695 (695)(F) 4
Other........................... -- 47 (47)(F) --
---- ------- -------- -------
Total revenues................ 315 14,717 (14,717) 315
---- ------- -------- -------
Expenses:
General and administrative...... 29 2,424 (2,374)(F),(H) 79
Operating expenses.............. -- 4,773 (4,773)(F) --
Professional fees............... -- 162 838 (F),(J) 1,000
Interest........................ -- 2,653 (2,576)(F),(G) 77
Depreciation and amortization... 31 1,220 (1,220)(F) 31
---- ------- -------- -------
Total expenses................ 60 11,232 (10,105) 1,187
---- ------- -------- -------
Income (loss) before Gain on Sale
of Real Estate Investments....... 255 3,485 (4,612)(F) (872)
Gain on Sale of Real Estate
Investments...................... -- 27,812 (27,812)(F) --
---- ------- -------- -------
Net Income (loss) before limited
partners' interest in operating
partnership loss................. 255 31,297 (32,424) (872)
Limited partners' interest in
operating partnership income..... -- -- (147) (147)
---- ------- -------- -------
Net income (loss)................. $255 $31,297 $(32,571) $(1,019)
==== ======= ======== =======
</TABLE>
50
<PAGE>
MARYLAND PROPERTY CAPITAL TRUST, INC.
NOTES TO THE
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND FOR
THE YEAR ENDED DECEMBER 31, 1997
(UNAUDITED)
The Pro Forma Adjustments:
(F) As the Trust would be constructively liquidated as of the date of the
Merger, assumed to be January 1, 1997 for purposes of the Pro Forma
Condensed Combined Statements of Operations, the Trust would no longer
conduct operations as of this date. Therefore, all operations of the Trust
during these periods have been eliminated.
(G) To record additional interest expense in the amounts of $58,000 and $77,000
for the nine months ended September 30, 1998 and the year ended December
31, 1997, respectively, related to the new debt incurred by FYA.
(H) To record additional general and administrative expenses in the amount of
$38,000 and $50,000 for the nine months ended September 30, 1998 and the
year ended December 31, 1997, respectively.
(I) To reflect allocation of income to limited partners in the Operating
Partnership for the preferred distributions of $110,000 and $147,000 for
the nine months ended September 30, 1998 and the year ended December 31,
1997, respectively.
(J) To record the transaction costs of approximately $1,000,000.
51
<PAGE>
SELECTED FINANCIAL INFORMATION--THE TRUST
The following selected financial data for the year ended December 31, 1997,
the five months ended December 31, 1996, and the years ended July 31, 1996,
1995, 1994 and 1993 are derived from the audited financial statements of the
Trust. The financial data for the nine month periods ended September 30, 1998
and 1997 are derived from unaudited financial statements. The unaudited
financial statements include all adjustments, consisting of normal recurring
accruals, which the Trust considers necessary for a fair presentation of the
financial position and the results of operations for these periods.
Operating results for the nine months September 30, 1998 are not necessarily
indicative of the results that may be expected for the entire year ending
December 31, 1998. The data should be read in conjunction with the financial
statements, related notes, and other financial information incorporated by
reference herein.
<TABLE>
<CAPTION>
NINE MONTHS ENDED FIVE YEARS ENDED
--------------------------- YEAR ENDED MONTHS ENDED ------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31, JULY 31, JULY 31, JULY 31, JULY 31,
1998 1997 1997 1996** 1996 1995 1994 1993*
------------- ------------- ------------ ------------ -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues................ $2,603 $12,011 $14,717 $ 8,187 $ 21,799 $ 22,619 $ 21,623 $ 16,535
Expenses................ 1,225 9,199 11,232 6,651 21,506 20,603 20,044 24,865
------ ------- ------- -------- -------- -------- -------- --------
Income (Loss) before
Gain on Sale of Real
Estate Investments and
Extraordinary Item..... 1,378 2,812 3,485 1,536 293 2,016 1,579 (8,330)
Gain on Sale of Real
Estate Investments..... 4,083 26,128 27,812 832 6,094 3,209 2,510 7,700
------ ------- ------- -------- -------- -------- -------- --------
Income (Loss) before
Extraordinary Item..... 5,461 28,940 31,297 2,368 6,387 5,225 4,089 (630)
Extraordinary (Loss)
Gain from
Extinguishment of
Debt................... -- -- -- -- (473) 88 -- --
------ ------- ------- -------- -------- -------- -------- --------
Net Income (Loss)....... $5,461 $28,940 $31,297 $ 2,368 $ 5,914 $ 5,313 $ 4,089 $ (630)
------ ------- ------- -------- -------- -------- -------- --------
PER SHARE DATA
Basic Net Income (Loss)
Income (Loss) before
Gain on Sale of Real
Estate Investments and
Extraordinary Item.... $ 0.14 $ 0.30 $ 0.36 $ 0.16 $ 0.03 $ 0.23 $ 0.17 $ (0.93)
Gain on Sale of Real
Estate Investments.... 0.43 2.73 2.91 0.09 0.67 0.35 0.28 0.85
------ ------- ------- -------- -------- -------- -------- --------
Income (Loss) before
Extraordinary Item.... 0.57 3.03 3.27 0.25 0.70 0.58 0.45 (0.08)
Extraordinary (Loss)
Gain from
Extinguishment of
Debt.................. -- -- -- -- (0.05) 0.01 -- --
------ ------- ------- -------- -------- -------- -------- --------
Basic Net Income (Loss)
per Share............. $ 0.57 $ 3.03 $ 3.27 $ 0.25 $ 0.65 $ 0.59 $ 0.45 $ (0.08)
====== ======= ======= ======== ======== ======== ======== ========
Diluted Net Income
(Loss) per Share....... $ 0.57 $ 3.03 $ 3.27 $ 0.25 $ 0.64 $ 0.59 $ 0.45 $ (0.08)
====== ======= ======= ======== ======== ======== ======== ========
Dividends Declared per
Share.................. $ 1.15 $ 6.03 $ 8.93 $ 1.18 $ 3.23 $ 0.41 $ 0.30 $ 0.28
====== ======= ======= ======== ======== ======== ======== ========
Average Shares
Outstanding............ 9,584 9,561 9,567 9,353 9,097 9,044 9,030 9,029
====== ======= ======= ======== ======== ======== ======== ========
FINANCIAL POSITION AT
YEAR-END
Total Assets............ $3,093 $99,274 $21,183 $103,294 $112,619 $169,439 $176,833 $179,459
Net Real Estate
Investments............ -- 69,753 15,077 98,708 106,912 160,963 172,461 176,024
Total Debt Outstanding.. -- 36,420 8,345 36,650 36,889 71,816 81,479 86,492
Shareholders' Equity.... 2,570 56,767 6,814 61,372 70,076 93,709 91,703 90,134
</TABLE>
- -------
* Restated for change in accounting method to the equity method for Investment
Partnerships. The change did not affect net income (loss) or shareholders'
equity.
** The Trust's fiscal year changed from one which ended on July 31st to one
which ends on December 31st.
52
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS--THE TRUST
BUSINESS PLAN
Since 1995, the Trust has operated under a business plan which provided for
the orderly disposition of all of the Trust's investments on a property-by-
property basis. As of September 30, 1998, the Trust had disposed of all of its
real estate investments and owns approximately $3,000,000 in cash which it
intends to utilize to satisfy all of its remaining obligations and distribute
the remainder to its Shareholders.
In the summer of 1997, management of the Trust and the Trustees began to
consider possible alternatives for terminating the Trust once its assets has
been sold. In June 1998, after discussions with several groups, the Trust
announced that it had entered into an agreement to merge with an affiliate of
The Beal Companies LLP. However, the recent decline in the stock market, and in
REIT prices in particular, caused representatives of The Beal Companies LLP to
reassess their decision to merge. The result of this reassessment was a
decision to proceed on modified terms. In particular, the restructuring of the
merged entity's capitalization will result in the interests of the Trust's
Shareholders being junior to certain interests of affiliates of The Beal
Companies LLP. Therefore, at the time of the Merger, while the Trust's
Shareholders will receive all of the remaining assets prior to the consummation
of the Merger, the interests of the Trust's Shareholders in the surviving
entity from the Merger will be without value. The Merger is subject to the
approval of the Trust's Shareholders and, if approved, would eliminate the need
to establish a liquidating trust to hold reserves to meet contingent
liabilities of the Trust and the expenses related thereto (which expenses, net
of interest income, the Trustees of the Trust estimated to be $0.03 per Share).
It would also enable the Trust to distribute to its then existing Shareholders
substantially all of its net worth, which is currently estimated to be $0.23
per Share after giving affect to expected operating costs through the date of
Merger. To date, the Trust has distributed $13.65 per Share from the proceeds
of sales of its assets. If the Merger is consummated the distributions will
total approximately $13.88 per Share. In addition, the existing Shareholders
will be entitled to receive the net proceeds from litigation to determine the
full compensation due for certain land that was condemned at Loehmann's Fashion
Island prior to its sale (which amount the Trustees of the Trust do not expect
will exceed $0.10 per Share, and it could be zero).
Because of the time required for the reassessment of the Merger and the
renegotiation of the Merger documents, it is now estimated that the Trust will
consummate the Merger, if approved by the Shareholders, in late February or
March 1999. No assurance can be given that the Merger will be consummated.
In July 1998, the AMEX halted trading the Trust's Shares because the Trust
had completed the disposition of its real estate in accordance with its
business plan, and as a result, had fallen below the AMEX's guidelines for
continued listing. Because the Trust did not have sufficient tangible assets to
satisfy the AMEX guidelines, and would not satisfy such requirements after the
Merger, the AMEX delisted the Trust on October 29, 1998. The Trust is now
traded on NASDAQ's over-the-counter Bulletin Board (symbol "PCTG").
As a consequence of the implementation of the business plan, the disposition
of all of its investments and the payment of special dividends from the
proceeds of sales of the Trust's investments, certain operating results which
have historically been utilized to judge the Trust's financial performance
(such as Funds from Operations and Net Income) have decreased and management of
the Trust does not anticipate that the Trust will generate any net income in
the future.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES AT SEPTEMBER 30, 1998
The Trust had no debt at September 30, 1998 as compared to $8,345,000 at
December 31, 1997, which was comprised solely of a mortgage loan on Park Place.
The Trust sold Park Place in January 1998 subject to its mortgage loan. The
Trust has reviewed its liquidity needs in view of its business plan. The
Trust's principal liquidity needs are to fund normal operating expenses and the
minimum dividend distribution (if any) required to maintain the Trust's REIT
status under the Internal Revenue Code. The Trust expects to fund these
liquidity needs from interest income and cash on hand.
53
<PAGE>
At September 30, 1998, the Trust's entire portfolio of real estate
investments had been disposed of and its principal asset was $3,085,000 in
cash.
On June 17, 1998, the Trust's Cincinnati Marriott Inn $2,000,000 land
investment was purchased by the Trust's lessee for $2,000,000 and the Trust's
related leasehold mortgages were prepaid in their face amount of $4,316,000. In
August 1996, the Trust allocated $1,016,000 of its former allowance for
possible investment losses to these mortgages. As a consequence, the repayment
resulted in a gain to the Trust of $1,016,000. In addition, the Trust received
$1,600,000 of land rent and mortgage interest, earned between 1991 and 1994,
which had previously been written off.
On January 29, 1998, the Trust sold the Park Place office building in
Clayton, Missouri, for $14,145,000. The Trust realized a gain of $3,067,000 on
the sale of this investment.
During the first quarter of 1998, the Trust terminated the Amended and Restated
Deferred Stock Plan for Non-Employee Trustees. All of the assets of such plan,
which were held in a Rabbi Trust, were distributed to the Trustees. Previously,
in the Trust's financial statements, Shares held by the Rabbi Trust were
reflected as "treasury stock," the remaining assets were reflected in "other
assets" and the fund balance was reflected in "accounts payable and accrued
expenses."
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 VERSUS THE
NINE MONTHS ENDED SEPTEMBER 30, 1997
Revenues. Rents from Owned Properties held directly by the Trust (base rent
plus expense reimbursements) decreased 95% for the nine months ended September
30, 1998, as compared to the same period in the prior year, due to the sale, in
January 1998, of the Park Place office building, the Trust's last Owned
Property held directly by the Trust, and from the adjustment at June 30, 1998
of approximately $200,000 of previously recorded revenues from Loehmann's
Fashion Island, which had been sold in December 1977. During the three months
ended September 30, 1998, the Trust received $48,000 from the new owners of
Loehmann's Fashion Island related to the time of the Trust's ownership. This
amount had not previously been accrued.
Base income from Structured Transactions held directly by the Trust increased
2% for the nine months ended September 30, 1998, as compared to the same period
in the prior year, due to the receipt, in June 1988, of $1,600,000 of land rent
and mortgage interest (earned between 1991 and 1994 but previously written off)
from the Cincinnati Marriott Inn. The receipt and recognition of this income
occurred in conjunction with the disposition of the Trust's investments in the
Cincinnati Marriott Inn.
Overage income from Structured Transactions held directly by the Trust
decreased 89% for the nine months ended September 30, 1998, as compared to the
same period in the prior year, due to the sale of all but one of the Trust's
remaining Structured Transactions held directly by the Trust prior to calendar
1998 and the disposition of the Cincinnati Marriott Inn investments in June
1998.
Interest income decreased 45% for the nine months ended September 30, 1998,
as compared to the same period in the prior year. Interest income is earned on
net proceeds received by the Trust form the sale of its investments, which
proceeds are invested until they are distributed to Shareholders in the form of
special dividends.
Expenses. Total expenses decreased 87% for the nine months ended September
30, 1998, as compared to the same period in the prior year, due to the sale of
all but one of the Trust's remaining real estate investments in the first
quarter of 1998 and the disposition of the last real estate investment in June
1998. Included in total expense decreases were decreases in professional fees
of 96% for the nine months ended September 30, 1998, as compared to the same
period in the prior year, due to the downward revision at June 30, 1998 of
approximately $140,000 accrued for estimated liabilities for legal and similar
fees payable that were, in fact, not incurred. General and administrative
expenses also decreased by 46% for the nine months ended September 30, 1998, as
compared to the same period in the prior year, primarily due to the reduction
of the Trust's management and support staff.
54
<PAGE>
Gain on Sale of Real Estate Investments. Net income for the nine months ended
September 30, 1998 included a gain on sale of real estate investments of
$4,083,000, comprised of $1,016,000 from the prepayment of Cincinnati Marriott
Inn's leasehold mortgages at their face amount in June 1998 and $3,067,000 from
the sale of the Park Place office building in January 1998. For the nine months
ended September 30, 1997, net income included a gain on sale of real estate
investments of $26,128,000, comprised of $4,750,000 from the sale of Elm Creek
and Sandpiper Cove apartment investments in September 1997, $1,944,000 from the
sale of the Lakeside Center investment in June 1997, $857,000 from the sale of
the Telegraph Hill apartments in June 1997 and $18,577,000 from the sale of the
City Centre Holiday Inn investment in January 1997.
Dividends. During the nine months ended September 30, 1998, the Trust
declared and paid dividends of $1.15 per Share.
On June 16, 1998, the Trustees declared a special dividend of $0.80 per
Share, payable July 10, 1998 to Shareholders of record on July, 1, 1998. Due to
the magnitude of the dividend declared in relation to the Trust's stock price
at that time, and the halting of trading after July 10, 1998, the Trust's
Shares did not trade ex-dividend on the AMEX.
On February 3, 1998, the Trustees declared a special dividend of $0.35 per
share, payable February 27, 1998 to Shareholders of record on February 13,
1998. Due to the magnitude of the dividend declared in relation to the Trust's
stock price at that time, the AMEX determined that the Trust's Shares would
trade ex-dividend on March 2, 1998.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES AT DECEMBER 31, 1997
The Trust has reviewed its short-term and long-term liquidity needs in view
of its business plan and the adequacy of cash provided by operating activities
and other liquidity sources to meet these needs. The Trust's principal short-
term liquidity needs are to fund normal operating expenses and the minimum
dividend distributions (if any) required to maintain the Trust's REIT status
under the Internal Revenue Code. The Trust expects to fund these short-term
liquidity needs from cash flows provided by operating activities and the
proceeds of sales of investments. Net proceeds from the sales of the Trust's
investments will also be used to make dividend distributions to the Trust's
Shareholders and to establish any reserve necessary for the liquidating trust.
The Trust's debt at December 31, 1997 was $8,345,000, composed solely of a
mortgage note payable on Park Place, as compared to $36,889,000 at July 31,
1996 and $71,816,000 at July 31, 1995. The Trust's mortgage notes payable of
$36,889,000 at July 31, 1996 were comprised of three mortgages, two on the
Trust's Owned Properties held directly by the Trust and one on the Asset Held
for Sale directly by the trust.
The Trust acquired its lessee's interest in the Park Place office building
located in Clayton, Missouri, in January 1991, subject to an $8,600,000 non-
recourse mortgage loan. In November 1993, the Trust refinanced the first
mortgage, resulting in a reduction in the annual effective interest rate from
8.25% to 5.65%. The mortgage balance was $8,345,000 at December 31, 1997. Park
Place was sold in January 1998 subject to this mortgage.
REVIEW OF REAL ESTATE INVESTMENTS
At December 31, 1997, the Trust's principal asset was its $15,077,000
portfolio of real estate investments, which was comprised of two Assets Held
for Sale directly by the Trust (which were carried at the lower of cost or fair
value less anticipated closing costs), both of which were sold subsequent to
the end of the year. Set forth below is a discussion of significant changes in
the portfolio during the year.
Office Buildings. At December 31, 1997, the Trust had one office building
investment, Park Place, an Asset Held for Sale directly by the Trust,
(previously classified as an Owned Property held directly by the Trust). During
the year ended December 31, 1997, the Trust sold two office investments.
55
<PAGE>
Citibank Office Plaza--Schaumburg, located in Schaumburg, Illinois, was sold
in July 1997 at its book value. The Trust received net sales proceeds of
approximately $8,700,000 after closing expenses. On August 1, 1996 the Trust
wrote down its investment in this property by $936,000. One Park West located
in Chevy Chase, Maryland, was sold in October 1997 for $20,685,000. The Trust
realized a gain from the sale of this property of approximately $1,334,000
($.14 per share) and net proceeds of $10,900,000 after closing expenses and
repayment of the first mortgage.
At December 31, 1997, Park Place, located in Clayton, Missouri, and
previously classified as an Owned Property held directly by the Trust, was
under contract to be sold for $14,145,000. Subsequent to the end of the year
the sale was consummated and the Trust realized a gain on the sale of this
property of $3,067,000. On August 1, 1996 the Trust wrote down its investment
in this property by $1,239,000. At the time of sale the property was subject to
a $8,345,000 first mortgage loan.
Hotels. At December 31, 1997, the Trust had one hotel investment, Cincinnati
Marriott Inn, an Asset Held For Sale directly by the Trust formerly classified
as a Structured Transaction held directly by the Trust. On August 1, 1996 the
Trust wrote down its investment in this property by $1,016,000. This property
was sold on June 17, 1998.
During the year ended December 31, 1997, the Trust sold one hotel investment.
In January 1997, the Trust sold its $2,000,000 land investment in City Centre
Holiday Inn located in Chicago, Illinois, for $20,577,000. The Trust realized a
gain on this sale of $18,577,000 ($1.94 per share).
Apartments. At December 31, 1997, the Trust did not own any apartment
investments.
During the year ended December 31, 1997, the Trust sold four apartment
investments. In September 1997, the Trust's $5,400,000 investment in the
Sandpiper Cove apartments, located in Boynton Beach, Florida, and its
$9,770,000 investment in the Elm Creek apartments, located in Elmhurst,
Illinois, were repurchased by an affiliate of the Trust's lessee/mortgagors for
$20,000,000. The Trust realized a gain on the sale of these investments of
$4,750,000 ($.50 per share). In October 1997, the Trust's $400,000 investment
in Northbrook apartments located in San Bernardino, California was repurchased
by its lessee for $750,000. The Trust realized a gain on this property of
$350,000 ($.04 per share). Telegraph Hill apartments, located in Houston,
Texas, which was held in an Investment Partnership, was sold in June 1997. The
Trust's share of the proceeds was $1,300,000, which resulted in a gain of
$857,000 ($.09 per share). On August 1, 1996 the Trust wrote down its
investment in this property by $300,000.
Shopping Centers. At December 31, 1997, the Trust did not own any shopping
center investments.
During the year ended December 31, 1997 the Trust sold three shopping center
investments. In June 1997, the Trust's lessee of Lakeside Center located in
Burbank, California, repurchased the Trust's $350,000 land investment for
$2,350,000. The Trust realized a gain from the sale of this investment of
$1,944,000 ($.20 per share). In September 1997, the Trust's lessee/mortgagor of
Roseburg Valley Mall, located in Roseburg, Oregon, repurchased the Trust's
$3,950,000 investment at book value, resulting in no gain or loss. Loehmann's
Fashion Island located in Aventura, Florida, was reclassified to an Asset Held
for Sale directly by the Trust at March 31, 1997. On August 1, 1996 the Trust
wrote down its investment in this property by $869,000. The property was sold
at its book value of $37,300,000 in December 1997. After repayment of the first
mortgage and closing expenses, the net proceeds from this sale were
$17,000,000.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 VERSUS THE
FISCAL YEAR ENDED JULY 31, 1996
The Trust has been disposing of its investments in accordance with the
Business Plan. At December 31, 1997, the Trust had two assets remaining. As a
result, the Trust's revenues, expenses and resulting net income have decreased
and are expected to continue to do so.
Revenues. Revenues from Owned Properties held directly by the Trust (base
rent plus expense reimbursements) decreased 15%, primarily due to the Trust's
sales of Citibank Office Plaza--Oak Brook in
56
<PAGE>
January 1996, Citibank Office Plaza--Schaumburg in July 1997, One Park West in
October 1997 and Loehmann's Fashion Island in December 1997.
Base income from Structured Transactions held directly by the Trust (land
rent and mortgage interest) decreased 27%, primarily due to the sales of
Yorkshire in December 1995, Bluffs II in May 1996, City Centre Holiday Inn in
January 1997, Lakeside Center in June 1997, Roseburg Valley Mall, Elm Creek and
Sandpiper Cove in September 1997, and Northbrook in October 1997.
Overage income decreased 50% primarily due to the sale of City Centre Holiday
Inn in January 1997 and Elm Creek and Sandpiper Cove in September 1997.
Income from unconsolidated Investment Partnerships decreased by 96% due to
the sales of Chimney Rock in September 1995, Crossroads Mall in October 1995,
College Hills 3 in March 1996, College Hills 8 and Financial Plaza in April
1996, the Lisle Hilton Inn (a mortgage repayment) in June 1996, Boardwalk and
St. Charles in June 1996, Canyon View II in August 1996, Plaza West Retail
Center in October 1996 and Telegraph Hill in June 1997.
Interest income increased 43% for the year ended December 31, 1997. Interest
income is earned on net proceeds received by the Trust from the sale of its
investments, which proceeds are invested until they are distributed to
shareholders in the form of special dividends.
Advisory fee income decreased 88% due to the sale of the investments held by
Investment Partnerships noted above.
Expenses. Expenses on Owned Properties held directly by the Trust decreased
14% due to the sale of the properties noted above. Interest expense decreased
45% primarily due to the retirement of all of the Trust's remaining outstanding
10% and 9 3/4% Convertible Subordinated Debentures prior to June 1996 and a
$3,000,000 amortization payment made on the Loehmann's Fashion Island first
mortgage in June 1996. The decrease was also due to the sale of One Park West
in October 1997 and Loehmann's Fashion Island in December 1997, both of which
were encumbered by first mortgages.
Depreciation decreased 70% due to the elimination of depreciation on Citibank
Office Plaza--Schaumburg and Loehmann's Fashion Island in March 1997 and One
Park West in July 1996 upon their reclassification to Assets Held for Sale
directly by the Trust prior to their sale.
General and administrative expenses decreased by 34% primarily due to the
accrual of severance arrangements in prior periods for certain of the Trust's
employees in conjunction with the implementation of the Business Plan.
Professional fees decreased by 66% primarily due to the reduced size of the
Trust's portfolio. Trustees' fees and expenses did not change significantly in
calendar 1997 from fiscal 1996.
During the fourth quarter of the fiscal year ended July 31, 1996, the Trust
wrote down its investment in Loehmann's Fashion Island by $5,612,000, of which
$3,000,000 was charged to operations and $2,612,000 was charged to the Trust's
previously established allowance for possible investment losses.
Gain on Sale of Real Estate Investments. Net income for the calendar year
ended December 31, 1997 included a gain on the sale of real estate investments
of $27,812,000 ($2.91 per share) consisting of a gain of $18,577,000 ($1.94 per
share) from the sale of the land underlying City Centre Holiday Inn, a gain of
$857,000 ($.09 per share) from the sale of Telegraph Hill, a gain of $1,944,000
($.20 per share) from the sale of the land underlying Lakeside Center, a gain
of $4,750,000 ($.50 per share) from the sale of the land underlying Elm Creek
and Sandpiper Cove, a gain of $350,000 ($.04 per share) from the sale of the
land underlying Northbrook and a gain of $1,334,000 ($.14 per share) from the
sale of One Park West.
Extraordinary Loss from Extinguishment of Debt. Net income for the fiscal
year ended July 31, 1996 reflected an extraordinary loss from extinguishment of
debt of $473,000 related to the write-off of capitalized issuance costs when
the Trust redeemed its Convertible Subordinated Debentures.
57
<PAGE>
Dividends. Dividends declared in respect of calendar year 1997 were $8.93 per
share consisting of $.18 per share in regular quarterly dividends and $8.75 per
share in special dividends.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED JULY 31, 1996 VERSUS THE FISCAL
YEAR ENDED JULY 31, 1995
Revenues. Rents from Owned Properties held directly by the Trust (base rent
plus expense reimbursements) decreased 20%, primarily due to the Trust's sales
of Citibank Office Plaza--Oak Brook office building in January 1996 and 6110
Executive Boulevard office building in January 1995, and the receipt by the
Trust in the first quarter of fiscal 1995 of $404,000 of nonrecurring revenues
related to the settlement of a bankruptcy claim filed by the Trust against a
former tenant at Loehmann's Fashion Island.
There was no significant change in base income from Structured Transactions
held directly by the Trust (land rent and mortgage interest) for the year ended
July 31, 1996, as compared to the prior year. Overage income from Structured
Transactions held directly by the Trust increased 24% for the year ended July
31, 1996, as compared to the prior year, primarily due to increased overage
income from the Sandpiper Cove and City Centre Holiday Inn investments.
The Trust's share of income from unconsolidated Investment Partnerships
increased 79% for the year ended July 31, 1996, as compared to the prior year,
primarily due to the increased net income recorded by the Trust from Midwest,
an Investment Partnership in which the Trust owned a 53.3% general partner
interest. This resulted primarily from the cessation of depreciation on the
Partnership's properties when they were reclassified to Assets Held for Sale.
The increase is also due to the improved performance of certain properties in
the Southwest portfolio, and the settlement of litigation relating to Canyon
View and receipt of certain income in fiscal 1996 which had not been previously
accrued. These increases were offset by the loss of revenues due to the
prepayment of the Lisle Hilton Inn investment and the sales of the St. Charles
and Boardwalk apartments in the fourth quarter of fiscal 1996, Financial Plaza,
College Hills 3 and College Hills 8 in the third quarter of fiscal 1996, the
Crossroads Mall investment and the Chimney Rock apartments in the first quarter
of fiscal 1996 and the Braes Hill apartments in the third quarter of fiscal
1995.
Advisory fee income increased 18% for the year ended July 31, 1996, as
compared to the prior year, primarily due to the increase in operating
distributions paid by the Trust's Investment Partnerships.
Interest income was earned by the Trust in the amount of $486,000 for the
year ended July 31, 1996 as compared to $108,000 in the prior year. The
increased interest income in fiscal 1996 was primarily from the short-term
investment of sales proceeds prior to their use for the retirement of
debentures or payment of special dividends.
Expenses. Expenses on Owned Properties held directly by the Trust decreased
18% for the year ended July 31, 1996, as compared to the prior year, primarily
due to the sale of Citibank Office Plaza--Oak Brook in January 1996 and the
sale of 6110 Executive Boulevard in January 1995.
Depreciation expense decreased 4% for the year ended July 31, 1996 as
compared to the prior year, primarily due to the elimination of depreciation on
Citibank Office Plaza--Oak Brook upon its reclassification to an Asset Held for
Sale directly by the Trust in July 1995 and the sale of 6110 Executive
Boulevard in January 1995, offset in part by the write-off in the second
quarter of fiscal 1996 of certain tenant improvements at Citibank Office
Plaza--Schaumburg related to a tenant's bankruptcy and the write-off of certain
tenant improvements at Loehmann's Fashion Island related to the early
termination of certain space leases.
Interest expense decreased 31% for the year ended July 31, 1996 as compared
to the prior year primarily due to the retirement of all of the Trust's
remaining outstanding 10% and 9 3/4% Convertible Subordinated Debentures during
fiscal 1996 and the sale of 6110 Executive Boulevard in January 1995, which was
encumbered by a first mortgage, partially offset by an increase in interest
expense related to Loehmann's Fashion Island.
58
<PAGE>
General and administrative expenses increased 65% for the year ended July 31,
1996, as compared to the prior year, primarily due to the accrual of severance
arrangements for the Trust's employees in conjunction with the implementation
of the Business Plan.
Professional fees increased 31% for the year ended July 31, 1996 as compared
to the prior year, due to the legal fees incurred as a result of the Trust's
adoption of its Business Plan. Trustees' fees and expenses did not change
significantly in fiscal 1996 from fiscal 1995.
During the fourth quarter of fiscal 1996, the Trust wrote down its investment
in Loehmann's Fashion Island by $5,612,000, of which $3,000,000 was charged to
operations and $2,612,000 was charged to the Trust's previously established
allowance for possible investment losses.
Gain on Sale of Real Estate Investments. Net income for the year ended July
31, 1996 included gains on the sale of real estate investments of $6,094,000
($.67 per share), consisting of a gain of $1,320,000 ($.15 per share) from the
sale of the land underlying Bluffs II, a gain of $51,000 ($.01 per share) from
the sale of St. Charles, Chimney Rock and Boardwalk apartments, a gain of
$443,000 ($.05 per share) from the sales of certain properties held in Midwest,
primarily College Hills 8, a gain of $470,000 ($.05 per share) from the sale of
the Citibank Office Plaza-Oak Brook, a gain of $310,000 ($.03 per share) from
the sale of the land underlying Yorkshire apartments, and a gain of $3,500,000
($.38 per share) from the sale of the land underlying Crossroads Mall. In the
prior year net income included gains on the sale of real estate investments of
$3,209,000, consisting of a gain of $3,099,000 ($.34 per share) from the sale
of 6110 Executive Boulevard and a gain of $110,000 ($.01 per share) from the
sale of Braes Hill apartments.
Extraordinary Loss from Extinguishment of Debt. During fiscal 1996, the Trust
retired all of its 10% Convertible Subordinated Debentures ($29,125,000
principal amount) and 9 3/4% Convertible Subordinated Debentures ($2,546,000
principal amount). Due to the early retirement of these Convertible
Subordinated Debentures, the Trust incurred an extraordinary loss on the
extinguishment of debt from the write-off of capitalized issuance costs in the
amount of $473,000 ($.05 per share).
Dividends. Dividends declared in respect of fiscal 1996 were $3.23 per share
versus $.41 per share for fiscal 1995. Included in the 1996 dividends were
special dividends of $2.75 per share which represented the first distributions
to shareholders from the proceeds of the sale of investments under the Business
Plan.
RESULTS OF OPERATIONS FOR THE FIVE MONTHS ENDED DECEMBER 31, 1996 (THE
TRANSITION PERIOD) VERSUS THE FIVE MONTHS ENDED DECEMBER 31, 1995
Revenues. Rents from Owned Properties held directly by the Trust (base rent
plus expense reimbursements) decreased 8% for the five-month Transition Period,
as compared to the same period in the prior year, primarily due to the sale of
Citibank Office Plaza--Oak Brook in January 1996, offset in part by $230,000
received from the settlement of litigation with a former tenant of Loehmann's
Fashion Island and the inclusion of rents from One Park West which was
reclassified to an Asset Held for Sale directly by the Trust at July 31, 1996.
Base income from Structured Transactions held directly by the Trust (land
rent and mortgage interest) decreased 4% for the five months ended December 31,
1996 as compared to the same period in the prior year, primarily due to the
sales of the Yorkshire apartments investment in December 1995 and the Bluffs II
apartments investment in May 1996.
Overage income from Structured Transactions held directly by the Trust
increased 108% for the five months ended December 31, 1996, as compared to the
same period in the prior year primarily due to increased overage income from
the City Centre Holiday Inn (which was sold by the Trust after the Transition
Period) and Sandpiper Cove investments.
The Trust's share of income from unconsolidated Investment Partnerships
decreased 96% for the five months ended December 31, 1996 as compared to the
same period in the prior year, primarily due to the
59
<PAGE>
dispositions of the Chimney Rock apartments in September 1995, the Crossroads
Mall investment in October 1995, the College Hills 3 investment in March 1996,
the College Hills 8 and Financial Plaza investments in April 1996, the St.
Charles and Boardwalk apartments investments in June 1996, the Canyon View II
apartments investment in August 1996 and the Plaza West Retail Center in
October 1996, and the repayment of the first mortgage investment in the Lisle
Hilton Inn in June 1996.
Advisory fee income decreased 88% for the five months ended December 31,
1996, as compared to the same period in the prior year, due to the sale of
certain investments held by the Investment Partnerships as noted above.
Expenses. Expenses on Owned Properties held directly by the Trust decreased
6% for the five months ended December 31, 1996, as compared to the same period
in the prior year, due to the sale of Citibank Office Plaza--Oak Brook, offset
in part by an increase in real estate taxes at certain Owned Properties held
directly by the Trust.
Interest expense decreased 49% for the five months ended December 31, 1996,
as compared to the same period in the prior year, primarily due to the
retirement of all of the Trust's remaining outstanding 10% and 9 3/4%
Convertible Subordinated Debentures during the fiscal year ended July 31, 1996.
General and administrative expenses increased 7% for the five months ended
December 31, 1996, as compared to the same period in the prior year, primarily
due to the accrual of severance arrangements for certain of the Trust's
employees in conjunction with the implementation of the Business Plan.
Depreciation expense decreased 8% for the five months ended December 31,
1996, as compared to the same period in the prior year, due to the elimination
of depreciation on One Park West upon its reclassification to an Asset Held for
Sale directly by the Trust in July 1996, offset in part by the write-off of
certain tenant improvements due to early lease terminations at Loehmann's
Fashion Island.
Professional fees decreased 36% for the five months ended December 31, 1996,
as compared to the same period in the prior year, primarily due to higher legal
fees in the prior year associated with the adoption of the Business Plan.
Trustees' fees and expenses did not change significantly from the prior year.
Gain on Sale of Real Estate Investments. Net income for the five months ended
December 31, 1996 included a gain on the sale of real estate investments of
$832,000 from the sale of Canyon View II apartments. For the five months ended
December 31, 1995, net income included gains on the sale of real estate
investments of $3,811,000 from the sales of the Crossroads Mall, the Yorkshire
apartments and the Chimney Rock apartments investments.
Extraordinary Loss from Extinguishment of Debt. Net income for the five
months ended December 31, 1995 reflected an extraordinary loss from
extinguishment of debt of $186,000 related to the write-off of original
issuance costs when the Trust redeemed a portion of its 10% Convertible
Subordinated Debentures at face value.
Dividends. Dividends declared in respect of the Transition Period were $1.18
per share. Included in this amount was a special dividend of $1.00 per share
from the proceeds from sale of investments.
Inflationary and Economic Factors. The effect of inflation upon the Trust's
operations and real estate investments has not been material. The Trust
believes that many of the real estate markets in which the Trust operates have
improved significantly from the first half of the decade. Though not applicable
to all properties in the Trust's portfolio, rental rates at many of the
properties in 1997 increased by the rate of or in excess of inflation. Although
operating expenses are generally impacted by inflation, increases in operating
expenses in the past year caused by inflation have not been material.
60
<PAGE>
SELECTED FINANCIAL INFORMATION--FYA
The selected financial information presented below as of and for the years
ended December 31, 1997, 1996 and 1995 has been derived from FYA's Financial
Statements, which have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report included elsewhere in this Proxy
Statement/Prospectus. The selected financial information as of and for the nine
months ended September 30, 1998 and 1997 and as of and for the years ended
December 31, 1994 and 1993, has not been audited but, in the opinion of
management of FYA, includes all adjustments (consisting only of normal,
recurring adjustments) necessary to present fairly such information in
accordance with generally accepted accounting principles applied on a
consistent basis.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- ------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- ----- ----- ----- ----- ------
(IN THOUSANDS)
SUMMARY OF OPERATIONS
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues.................... $ 237 $ 236 $ 315 $ 315 $ 314 $ 314 $ 558
Costs and Operating
Expenses................... 48 44 60 $ 67 101 113 486
-------- -------- ----- ----- ----- ----- ------
Operating Income............ 189 192 255 248 213 201 72
Gain on Sale of Assets...... -- -- -- -- -- -- 2,220
-------- -------- ----- ----- ----- ----- ------
Net Income.................. $ 189 $ 192 $ 255 $ 248 $ 213 $ 201 $2,292
======== ======== ===== ===== ===== ===== ======
FINANCIAL POSITION AT PERIOD-END
Working Capital............. $ 128 $ 121 $ 122 $ 112 $ 103 $ 87 $ (16)
Total Assets................ 1,547 1,585 1,552 1,587 1,629 1,635 1,663
Partners' Capital........... 1,502 1,540 1,530 1,565 1,607 1,614 1,558
</TABLE>
61
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS--FYA
FYA currently owns and operates 17,250 square feet of laboratory and office
space, which is situated on 1.1 acres of land, located at 51 New York Avenue in
Framingham, Massachusetts. Genzyme Corporation is the sole tenant of the
property. The lease, as amended, is for a term of twenty years that expires in
September 2005. Genzyme Corporation has two five-year options to extend the
term of the lease. In addition, the tenant is also responsible for direct
payment of substantially all of the operating expenses including maintenance,
real estate taxes and insurance. See "THE CORPORATION--Description of
Property."
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AS COMPARED
WITH THE NINE MONTHS ENDED SEPTEMBER 30, 1997
Revenues. Rental income for the nine months ended September 30, 1998 and 1997
totaled $232,915 and $232,912, respectively. Total income for the nine months
ended September 30, 1998 totaled $236,621, as compared to $236,431 for the nine
months ended September 30, 1997. In addition to rental income, FYA earned other
income consisting primarily of interest from working capital reserves.
Expenses. Property operating expenses not paid directly by the tenant were
$23,899 for the nine months ended September 30, 1998, as compared to $21,154
for the nine months ended September 31, 1997.
FYA pays management fees calculated at the rate of 3% of gross receipts (as
defined in the management agreement) to a related party of FYA. Management fees
paid for the nine months ended September 30, 1998 and 1997 totaled $8,148 for
both periods. FYA also incurred other expenses during this period, including,
but are not limited to, audit and tax preparation, travel reimbursement, dues
to real estate organizations and liability insurance.
Net Income. Net income from operations for the nine months ended September
30, 1998 totaled $189,403, as compared to $191,958 for the nine months ended
September 30, 1997.
Inflation. The tenant is responsible for paying substantially all of the
operating costs including the real estate taxes. FYA believes that this reduces
the risk of adverse effects of inflation on the business and operations of FYA.
Financial Condition, Liquidity and Capital Resources. FYA had no debt during
fiscal 1998 and 1997. In addition, the tenant directly pays for most of the
operating expenses. FYA believes that there is an adequate level of working
capital held by FYA to cover any type of extraordinary capital expenditure.
During the nine months ended September 30, 1998 and 1997, distributions to the
partners totaled $217,500. In October 1998, FYA also distributed an additional
$72,500.
RESULTS OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 AS COMPARED
WITH THE FISCAL YEAR ENDED DECEMBER 31, 1996
Revenues. Rental income for the year ended December 31, 1997 totaled
$311,338, as compared with $311,216 for the year ended December 31, 1996. Total
income for fiscal year 1997 and 1996 were $315,117 and $314,449, respectively.
In addition to rental income, FYA earned other income consisting primarily of
interest from working capital reserves. Interest and other income was $3,779
and $3,283 for 1997 and 1996, respectively.
Expenses. Property operating expenses not paid directly by the tenant were
$29,380 and $30,354 for the years ended 1997 and 1996, respectively.
FYA pays management fees calculated at the rate of 3% of gross receipts (as
defined in the management agreement) to a related party of FYA. Management fees
paid for the fiscal years ended 1997 and 1996 totaled $9,774 in both periods.
FYA also incurred other expenses, including, but are not limited to, audit and
tax preparation, travel reimbursement, dues to real estate organizations and
liability insurance.
62
<PAGE>
Net Income. Net income for the fiscal years ended 1997 and 1996 were $254,646
and $247,558, respectively.
Inflation. The tenant is responsible for paying substantially all of the
operating costs including the real estate taxes thereby reducing the risk of
adverse effects on inflation.
Financial Condition, Liquidity and Capital Resources. FYA had no debt during
1997 and 1996. In addition the tenant directly pays for most of the operating
expenses. Management feels that the level of working capital maintained by FYA
is adequate to cover any extraordinary event. During the years ended 1997 and
1996, FYA made distributions to its partners totaling $290,000.
YEAR 2000 ISSUE
The "Year 2000 Issue" has arisen because existing computer programs use only
the last two digits to refer to a year, rather than four digits. If not
corrected, many computer applications could fail or create erroneous results.
As required by recent guidance from the Securities and Exchange Commission, the
following disclosure provides more detail regarding FYA's assessment of the
Year 2000 Issue.
FYA is currently assessing the effect of the Year 2000 Issue on its financial
and computer systems and expects to implement the necessary modifications to
mitigate any negative consequences associated with the Year 2000 Issue. FYA
does not anticipate Year 2000 Issues to have any material adverse effect on its
operations. In addition, FYA does not anticipate that it shall incur
substantial costs to address Year 2000 Issues or to ensure that its systems are
Year 2000 compliant. To the extent reasonably achievable, FYA will seek to
prevent or mitigate the effects of such possible failures through its ongoing
contingency planning efforts. However, there is no guarantee that such efforts
will be completely successful.
The preceding "Year 2000 Issue" discussion contains various forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and the Section 27A of the Securities Act of 1933, as
amended. These forward-looking statements represent FYA's beliefs or
expectations regarding future events. When used in the "Year 2000 Issue"
discussion, the words "believes," "expects," "estimates" and similar
expressions are intended to identify forward-looking statements. Forward-
looking statements include, without limitation, FYA's expectations as to when
it will complete its Year 2000 contingency plans; its estimated cost of
achieving Year 2000 readiness; and the Company's belief that its internal
systems will be Year 2000 compliant in a timely manner. All forward-looking
statements involve a number of risks and uncertainties that could cause the
actual results to differ materially from the projected results. Factors that
may cause these differences include, but are not limited to, the availability
of qualified personnel and other information technology resources; the ability
to identify and remediate all date sensitive lines of computer code or to
replace embedded computer chips in affected systems or equipment; and the
actions of governmental agencies or other third parties with respect to Year
2000 problems.
63
<PAGE>
SELECTED COMPARATIVE PER SHARE DATA
The following tables set forth certain information concerning the Trust's
Shares and the shares of Corporation Common Stock. Entries captioned "MPCT pro
forma" represent FYA's and the Trust's historical data combined and adjusted to
give effect to the Merger and Related Transactions on the basis described in
the notes to the Pro Forma Condensed Combined Financial Statements (Unaudited).
The following data should be read in conjunction with the Pro Forma Condensed
Combined Financial Statements (Unaudited) included elsewhere in this Proxy
Statement/Prospectus, the Trust's consolidated financial statements
incorporated by reference in this Proxy Statement/Prospectus and FYA's
financial statements included elsewhere in this Proxy Statement/Prospectus.
Book value per share of common stock as of September 30, 1998:
<TABLE>
<S> <C>
PCT historical...................................................... $0.27
MPCT pro forma...................................................... --
</TABLE>
Net income (loss) per share of common stock:
<TABLE>
<CAPTION>
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
PCT historical....................... $0.57 $3.27
MPCT pro forma....................... (0.04) (2.13)
</TABLE>
Dividends declared per share of common stock:
<TABLE>
<CAPTION>
FOR THE NINE FOR THE YEAR
MONTHS ENDED ENDED
SEPTEMBER 30, 1998 DECEMBER 31, 1997
------------------ -----------------
<S> <C> <C>
PCT historical....................... $1.15 $8.93
MPCT pro forma....................... -- --
</TABLE>
64
<PAGE>
MARKET PRICES AND CASH DIVIDENDS INFORMATION
As a result of the disposition of all of the Trust's real estate investments,
the AMEX halted trading in the Shares at the close of business on July 10, 1998
and subsequently delisted the Shares on October 29, 1998. The Trust is not
traded on NASDAQ's over-the-counter Bulletin Board (symbol "PCTG").
The following table sets forth the high and low trading prices of the Trust's
Shares during the two most recent fiscal years:
Fiscal Year Ending December 31, 1998
<TABLE>
<CAPTION>
HIGH LOW
---- -----
<S> <C> <C>
First................... $1 $ 5/8
Second.................. 1 1/8 11/16
Third................... 1 1/8 15/16
Fourth.................. -- --
Fiscal Year Ended
December 31, 1997
First................... $8 3/4 $5 11/16
Second.................. 7 3/8 5
Third................... 7 3/8 5 9/16
Fourth.................. 6 3/4
</TABLE>
On June 17, 1998, the last full trading day preceding public announcement of
the signing of the Merger Agreement, the high, low and closing sales prices of
a Share on the AMEX were $.9375, $.8125 and $.875, respectively. On June 18,
1998, the date on which the signing of the Merger Agreement was announced, the
high, low and closing sales prices of a Share on the AMEX were $1.00, $.875 and
$.9375, respectively. On July 10, 1998, the last day of trading prior to the
halt of trading by the AMEX and the day on which the Trust distributed an $.80
per share special dividend, the high, low and closing sales prices of a Share
on the AMEX were $1.125, $1.00 and $1.125, respectively.
The following table sets forth the cash dividends, including special
dividends, paid by the Trust on the Shares for the two most recent fiscal years
and any interim period:
<TABLE>
<CAPTION>
DATE
DIVIDEND PAID
-------- --------
<S> <C> <C>
Fiscal Year Ending December 31, 1998
$ .35* 2/27/98
.80* 7/10/98
------
Total.................................................... $ 1.15
======
Fiscal Year Ending December 31, 1997
$ .09 2/24/97
2.00* 2/24/97
.06 5/23/97
.20* 5/23/97
.06 8/22/97
1.15* 8/22/97
.06 11/24/97
2.50* 11/24/97
2.90* 12/29/97
------
Total...................................................... $ 9.02
======
</TABLE>
- --------
* Note: These are special dividends
As of the record date, there were [ ] holders of record of the Trust's
Shares.
65
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of the record date, certain information
regarding each person (including any "group" as that term is used in Section
13(d)(3) of the Exchange Act known (based solely upon filings with the
Commission prior to such date pursuant to Sections 13(d) or 13(g) of the
Exchange Act) to own beneficially (as such term is defined in Rule 13d-3 under
the Exchange Act) more than 5% of the outstanding Shares of the Trust.
<TABLE>
<CAPTION>
NUMBER
OF
SHARES PERCENT OF
NAME AND ADDRESS OWNED OUTSTANDING SHARES
---------------- ------- ------------------
<S> <C> <C>
Warren E. Buffett................................. 815,100 8.5%
1440 Kiewit Plaza
Omaha, Nebraska 68131
</TABLE>
The following table sets forth, as of the record date, information known to
the Trust with respect to the beneficial ownership of Shares by (i) each
Trustee of the Trust, (ii) each executive officer of the Trust named in the
Summary Compensation Table under "Executive Compensation" and (iii) all
Trustees and executive officers of the Trust as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OWNERSHIP(1) CLASS
---------------- ------------ -------
<S> <C> <C>
Walter M. Cabot...................................... 22,165 (2)
John A. Cervieri Jr.................................. 0 --
Graham O. Harrison................................... 57,720 (2)
Walter F. Leinhardt.................................. 40 (2)
Robert M. Melzer..................................... 57,000(3) (2)
Glenn P. Strehle..................................... 20,110(4) (2)
All Trustees and executive officers as a group (6
persons)............................................ 157,035(5) 1.6%
</TABLE>
- --------
(1) Nature of beneficial ownership is sole voting and investment power except
as indicated in subsequent notes.
(2) Less than 1%.
(3) Includes 41,000 Shares owned by Mr. Melzer and 16,000 Shares held through
an Individual Retirement Account owned and controlled by Mr. Melzer.
(4) The Massachusetts Institute of Technology ("M.I.T.") owns 350,000 Shares
with respect to which Mr. Strehle has voting and investment power by virtue
of his position as Vice President for Finance and Treasurer of M.I.T.,
subject to the policies and procedures of the Investment Committee of
M.I.T. of which Committee Mr. Strehle is an ex-officio member. In addition,
the M.I.T. Retirement Plan owns 240,047 Shares with respect to which Mr.
Strehle has voting and investment power by virtue of his position as
Chairman of the Board of Trustees of the M.I.T. Retirement Plan. Mr.
Strehle disclaims beneficial ownership of the Shares owned by M.I.T. and
the M.I.T. Retirement Plan.
(5) Includes shares owned by members of the immediate families of certain
Trustees and officers, as to which shares the relevant Trustee or officer
disclaims beneficial ownership.
On the date of this Proxy Statement/Prospectus, the Trust is the sole
stockholder of the Corporation. At the Effective Time of the Merger, the
partners of FYA will own an aggregate of 319,489 shares of Corporation Common
Stock and the Shareholders will own an aggregate of 159,737 shares of
Corporation Common Stock.
66
<PAGE>
LEGAL MATTERS
The validity of the shares of Corporation Common Stock offered by this Proxy
Statement/Prospectus will be passed upon by Goodwin Procter & Hoar LLP.
EXPERTS
The consolidated financial statements and schedules of the Trust included in
the Trust's Annual Report on Form 10-K for the year ended December 31, 1997
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon included therein and incorporated by reference herein.
Such consolidated financial statements and schedules are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The audited financial statements of FYA as of and for each of the three years
ended December 31, 1997 included in this Proxy Statement/Prospectus have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in accounting and auditing in giving said
report.
OTHER MATTERS
The Trustees do not intend to bring any other matters before the Special
Meeting and as of the date hereof does not know of any other matters that may
be brought before the Special Meeting by others. If any other matter should
properly come before the Special Meeting, the proxy appointees will have
discretionary authority to vote the Shares thereby represented in accordance
with their best judgment.
By Order of the Trustees,
WALTER F. LEINHARDT
Secretary
67
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
TOGETHER WITH AUDITORS' REPORT
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Framingham York Associates Limited Partnership
We have audited the accompanying balance sheets of Framingham York Associates
Limited Partnership (a Massachusetts limited partnership) as of December 31,
1997, 1996 and 1995, and the related statements of income, partners' capital
and cash flows for each of the three years in the period ended December 31,
1997. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Framingham York Associates
Limited Partnership as of December 31, 1997, 1996 and 1995, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 8, 1998
F-2
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------------
1998 1997 1996 1995
------------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Rental Property, at cost (Note
2(e))
Land............................ $ 202,500 $ 202,500 $ 202,500 $ 202,500
Building........................ 1,235,600 1,235,600 1,235,600 1,235,600
Tenant improvements............. 402,114 402,114 402,114 402,114
---------- ---------- ---------- ----------
1,840,214 1,840,214 1,840,214 1,840,214
Less--Accumulated depreciation.. 820,143 796,975 766,085 729,700
---------- ---------- ---------- ----------
1,020,071 1,043,239 1,074,129 1,110,514
Cash and Cash Equivalents (Note
2(d)).......................... 173,824 144,079 133,392 124,798
Deferred Charges, net of
Accumulated Amortization of
$31,597 in 1998, $31,446 in
1997, $31,245 in 1996 and
$31,055 in 1995 (Notes 2(h) and
3)............................. 28,363 28,514 28,715 28,916
Deferred Rent (Note 2(g))....... 325,153 335,988 350,438 364,888
---------- ---------- ---------- ----------
$1,547,411 $1,551,820 $1,586,674 $1,629,116
========== ========== ========== ==========
LIABILITIES AND PARTNERS'
CAPITAL
Liabilities:
Accounts payable and accrued
expenses..................... $ 34,188 $ 10,500 $ 10,000 $ 10,000
Tenant security deposits...... 11,453 11,453 11,453 11,453
---------- ---------- ---------- ----------
45,641 21,953 21,453 21,453
Commitments and Contingencies
(Note 5)
Partners' Capital............... 1,501,770 1,529,867 1,565,221 1,607,663
---------- ---------- ---------- ----------
$1,547,411 $1,551,820 $1,586,674 $1,629,116
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
----------------- --------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Rental income (Note 2(g))....... $232,915 $232,912 $311,338 $311,216 $311,106
Miscellaneous income............ 3,706 3,519 3,779 3,283 3,096
-------- -------- -------- -------- --------
236,621 236,431 315,117 314,499 314,202
Expenses:
Administrative and financial
expenses....................... 23,899 21,154 29,380 30,354 29,212
-------- -------- -------- -------- --------
Income before depreciation and
amortization................... 212,722 215,277 285,737 284,145 284,990
Depreciation (Note 2(e)).......... 23,168 23,168 30,890 36,386 69,592
Amortization (Note 2(h)).......... 151 151 201 201 2,450
-------- -------- -------- -------- --------
Net income...................... $189,403 $191,958 $254,646 $247,558 $212,948
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
<TABLE>
<S> <C>
Partners' Capital, December 31, 1994................................ $1,634,715
Distributions to partners......................................... (240,000)
----------
Net income........................................................ 212,948
Partners' Capital, December 31, 1995................................ 1,607,663
Distributions to partners......................................... (290,000)
----------
Net income........................................................ 247,558
Partners' Capital, December 31, 1996................................ 1,565,221
Distributions to partners......................................... (290,000)
----------
Net income........................................................ 254,646
Partners' Capital, December 31, 1997................................ 1,529,867
Distributions to partners (unaudited)............................. (217,500)
Net income (unaudited)............................................ 189,403
----------
Partners' Capital, September 30, 1998 (unaudited)................... $1,501,770
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ ----------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net income................. $189,403 $191,958 $254,646 $247,558 $212,948
Adjustments to reconcile
net income to net cash
provided by operating
activities--
Depreciation and
amortization............. 23,319 23,319 31,091 36,587 72,042
Decrease in tenant
accounts receivable...... -- -- -- -- 2,089
Decrease in prepaid
expenses................. -- -- -- -- 212
Decrease (increase) in
deferred rent............ 10,835 10,838 14,450 14,450 (30,550)
Increase in accounts
payable and accrued
expenses................. 23,688 23,726 500 -- 500
-------- -------- -------- -------- --------
Total adjustments........ 63,845 57,883 46,041 51,037 44,293
-------- -------- -------- -------- --------
Net cash provided by
operating activities.... 247,245 249,841 300,687 298,595 257,241
-------- -------- -------- -------- --------
Cash Flows from Financing
Activities:
Distributions to partners.. (217,500) (217,500) (290,000) (290,000) (240,000)
-------- -------- -------- -------- --------
Net cash used in
financing activities.... (217,500) (217,500) (290,000) (290,000) (240,000)
-------- -------- -------- -------- --------
Net Increase in Cash......... 29,745 32,341 10,687 8,595 17,241
Cash, beginning of period.... 144,079 133,392 133,392 124,797 107,556
-------- -------- -------- -------- --------
Cash, end of period.......... $173,824 $165,733 $144,079 $133,392 $124,797
======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(1) BUSINESS AND ORGANIZATION
Framingham York Associates Limited Partnership (FYA) was formed pursuant to
the provisions of the Uniform Limited Partnership Act of Massachusetts to
acquire, hold, develop, operate and lease real property. FYA owns and operates
commercial real estate in Framingham, Massachusetts.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of Presentation
The financial statements and information included in these notes to the
financial statements as of September 30, 1998 and for the nine months ended
September 30, 1998 and 1997 are unaudited. In the opinion of management, such
financial statements and information reflect all adjustments necessary for a
fair presentation of the results of the respective interim periods. All such
adjustments are of a normal, recurring nature.
(b) Use of Estimates
The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(c) Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, tenant security deposits,
accounts payable and accrued expenses are reasonable estimates of their fair
value.
(d) Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with original
maturities of three months or less.
(e) Rental Property
Rental property, which consists of a commercial building, is stated at cost.
Significant renovations and improvements that improve or extend the useful life
of the assets are capitalized. The building is being depreciated over 40 years
using the straight-line method and tenant improvements are amortized over the
initial term of the related lease, 10 years.
FYA assesses the realizability of intangible and other long-lived assets in
accordance with Statement of Financial Accounting Standards (SFAS) No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets To
Be Disposed Of. SFAS No. 121 requires, among other things, that an entity
review its long-lived assets and certain related intangibles for impairment
whenever changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. As a result of its review, FYA does not believe that
any impairment currently exists related to its long-lived assets.
(f) Income Taxes
No provision for income taxes has been recorded on the books of FYA, as the
respective shares of taxable income are reportable by the partners on their
separate income tax returns.
F-7
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(g) Revenue Recognition
Rental income is recognized on a straight-line basis. This method normalizes
rental income by aggregating annual fixed rents over the term of the lease and
recognizing annual rental income in equal amounts. The difference between
actual rental payments and normalized rental income is capitalized as a
deferred rent asset, on the accompanying balance sheet, and is amortized over
the term of the lease.
(h) Deferred Charges
Deferred charges consist of capitalized lease acquisition costs which are
recorded at cost. The lease acquisition costs are amortized on a straight-line
basis over the respective lives of the leases. Unamortized costs are charged to
expense in the event of any early termination of the lease. The capitalized
loans costs are amortized over the term of the financing on a straight-line
basis.
(3) RELATED PARTY TRANSACTIONS
Included in deferred charges in the accompanying balance sheets are leasing
fees paid to an affiliate of the general partners for services rendered in
obtaining the lease. The leasing fee had an original cost of $26,775.
Under a management contract, FYA pays an affiliate of certain partners 3% of
all receipts for property management services. The amount incurred for these
services was $9,774 for 1997 and 1996, and $8,479 for 1995.
(4) LEASES
FYA, as a landlord, rents office and laboratory space located in Framingham,
Massachusetts, under an operating lease with Genzyme Corporation (see Note 6)
for the entire facility. The lease, as amended, has a term of 20 years with two
optional five-year extensions.
The tenant is fully responsible for direct payment of all operating expenses;
therefore, those amounts are not included in the table below. The approximate
minimum future rentals to be received under the operating lease for each of the
next five years and thereafter at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
MINIMUM
FUTURE
YEAR RENTALS
---- ----------
<S> <C>
1998........................................................... $ 333,000
1999........................................................... 357,000
2000........................................................... 357,000
2001........................................................... 357,000
2002........................................................... 357,000
Thereafter..................................................... 981,750
----------
$2,742,750
==========
</TABLE>
(5) COMMITMENTS AND CONTINGENCIES
(a) Concentration of Credit Risk
FYA maintains its cash and cash equivalents at financial institutions. The
combined account balances at each institution periodically exceed FDIC
insurance coverage, and, as a result, there is a concentration of credit risk
related to amounts on deposit in excess of FDIC insurance coverage. Management
of FYA believes the risk is not significant.
F-8
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(b) Environmental
FYA, as an owner of real estate, is subject to various environmental laws of
federal and local governments. Compliance by FYA with existing laws has not had
a material adverse effect on FYA's financial condition and results of
operations, and management does not believe it will have such an impact in the
future. However, FYA cannot predict the impact of new or changed laws or
regulations on its current properties or on properties that it may acquire in
the future.
(6) UNAUDITED SUMMARY FINANCIAL INFORMATION OF TENANT
Genzyme Corporation is the sole tenant for the property. Unaudited summary
financial information for Genzyme Corporation as of and for the year ended
December 31, 1997 is presented below:
BALANCE SHEET
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
ASSETS
<TABLE>
<S> <C>
Current Assets:
Cash and cash equivalents................................... $ 66,276
Accounts receivable, net.................................... 116,056
Inventories................................................. 137,708
Other current assets........................................ 85,483
----------
405,523
Property, plant and equipment, net.......................... 365,337
Long-term investments....................................... 91,627
Intangibles, net............................................ 243,071
Other assets................................................ 97,498
----------
Total assets.............................................. $1,203,056
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses....................... $ 85,274
Other current liabilities................................... 12,261
----------
97,535
Long-term debt and capital lease obligations.................. 117,978
Other liabilities............................................. 6,667
----------
Total liabilities......................................... 222,180
Shareholders' equity.......................................... 980,876
----------
Total liabilities and shareholders' equity................ $1,203,056
==========
</TABLE>
F-9
<PAGE>
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
STATEMENT OF OPERATIONS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
<TABLE>
<S> <C>
Revenues:
Net product sales............................................. $529,927
Net service sales............................................. 55,835
Other......................................................... 11,441
--------
597,203
Operating costs and expenses.................................... 501,225
--------
Operating income................................................ 95,978
Other expense, net.............................................. 5,351
--------
Income before income taxes...................................... 90,627
Provision for income taxes, net................................. 13,180
--------
Net income.................................................. $ 77,447
========
</TABLE>
F-10
<PAGE>
ANNEX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
PROPERTY CAPITAL TRUST
AND
MARYLAND PROPERTY CAPITAL TRUST, INC.
DATED AS OF JUNE 18, 1998, AS AMENDED
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<C> <S> <C>
ARTICLE 1. THE MERGER..................................................... A-4
Section 1.1 The Merger............................................... A-4
Section 1.2 The Closing.............................................. A-4
Section 1.3 Effective Time........................................... A-4
ARTICLE 2. CHARTER AND BY-LAWS OF SURVIVING CORPORATION................... A-4
Section 2.1 Charter.................................................. A-4
Section 2.2 By-laws.................................................. A-4
ARTICLE 3. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION................ A-5
Section 3.1 Directors................................................ A-5
Section 3.2 Officers................................................. A-5
ARTICLE 4. EFFECT ON SECURITIES........................................... A-5
Section 4.1 Conversion of Shares of the Trust........................ A-5
Section 4.2 Exchange of Certificates Representing Shares............. A-6
ARTICLE 5. CONDITIONS TO CLOSING.......................................... A-8
Section 5.1 Shareholder Approval..................................... A-8
Section 5.2 Investment Agreement..................................... A-8
Section 5.3 Merger Agreements........................................ A-8
Section 5.4 Satisfaction of Obligations.............................. A-8
ARTICLE 6. INDEMNIFICATION................................................ A-8
Section 6.1 No Modification.......................................... A-8
Section 6.2 Indemnification.......................................... A-8
Section 6.3 Additional coverage...................................... A-9
Section 6.4 Third-party rights....................................... A-9
ARTICLE 7. TERMINATION.................................................... A-9
ARTICLE 8. MISCELLANEOUS.................................................. A-9
Section 8.1 Entire Agreement......................................... A-9
Section 8.2 Succession and Assignment; Third-Party Rights............ A-10
Section 8.3 Counterparts............................................. A-10
Section 8.4 Headings................................................. A-10
Section 8.5 Governing Law............................................ A-10
Section 8.6 Amendments............................................... A-10
Section 8.7 Severability............................................. A-10
Section 8.8 Expenses................................................. A-10
Section 8.9 Service of Process....................................... A-10
Section 8.10 Exculpation.............................................. A-10
</TABLE>
A-2
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER dated as of June 18, 1998 (including all
exhibits, hereinafter referred to as this "Agreement") is made and entered into
by and between Property Capital Trust, a Massachusetts business trust (the
"Trust"), and Maryland Property Capital Trust, Inc., a Maryland corporation
(the "Corporation").
RECITALS
A. The Trust was organized pursuant to a Declaration of Trust dated June 9,
1969 (as amended and restated, the "Declaration of Trust").
B. Section 3.1 of the Declaration of Trust provides that the Trustees serving
under said Declaration of Trust
"without other or further authorization, shall have the absolute power and
exclusive control, management and authority over the Trust Property, the
disposition of the Trust Property and the conduct of the business of the
Trust, to the same extent as if the Trustees were the sole owners of the
Trust Property and the sole persons interested in the Trust in their own
right, subject only to the limitations expressly stated in this
Declaration. Such powers may be exercised without order of or resort to any
court or to the Shareholders. Without restricting or limiting the
generality of the foregoing powers, authority and discretion conferred by
this Declaration or which the Trustees may have by law, the Trustees shall
have power:
F. To acquire by purchase or otherwise, or to organize under the laws of
any jurisdiction, one or more corporations, associations, trusts or other
business entities, and, subject to Sections 10.1, 10.2 and 10.3 herein, to
dissolve, terminate, reorganize or liquidate the Trust or any business
entity acquired or organized hereunder, to merge or consolidate the Trust
with any business entity and to merge or consolidate any business entity
with the Trust."
C. The Trustees presently serving under the Declaration of Trust (the
"Trustees") have determined that it is in the interest of the Trust and of the
shareholders of the Trust that the business heretofore conducted by the Trust
be conducted by, and the properties and assets of the Trust (subject to all of
the liabilities and obligations of the Trust) be owned by, a corporate entity
in which the shareholders of the Trust will, immediately following such
reorganization, have the same pro rata interest as stockholders of said
corporation as such shareholders have as shareholders of the Trust.
D. The Trustees of the Trust have determined that a corporation organized
under the Maryland General Corporation Law (the "MGCL") is a proper and
advantageous form of corporate entity to carry on the business of the Trust.
E. The Trustees have caused the organization of the Corporation, which is a
qualified REIT subsidiary, under the MGCL and the Corporation currently has 100
shares of common stock outstanding, all of which are owned and held by the
Trust.
F. The consummation of the Merger (as defined below) is conditioned upon
approval of the holders of two-thirds of the shares of beneficial interest of
the Trust.
G. A special meeting of the shareholders of the Trust shall be called by the
President of the Trust on such day and at such time and place as he determines,
for the purpose of approving the Merger (as defined below) pursuant to this
Agreement and for such other business as he may determine is appropriate to be
considered at such meeting.
A-3
<PAGE>
H. The appropriate officers and representatives of the Trust shall prepare
and file with the Securities and Exchange Commission and distribute to
shareholders of the Trust notice of and a proxy statement with respect to such
special meeting of shareholders in combination with, if appropriate, a
prospectus relating to the shares of stock of the Corporation to be issued in
exchange for shares of the Trust.
I. Contemporaneously with the execution of this Agreement, the Corporation
and the Trust have entered into an Investment Agreement as the same shall be
amended from time to time, (the "Investment Agreement") with the Purchasers (as
such term is defined therein) which provides for, subject to the consummation
of the Merger (as defined below), the purchase of 319,489 shares of common
stock of the Corporation by the Purchasers at a price of $3.31653 per share.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Trust and the Corporation hereby agree as
follows:
ARTICLE 1. THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3 hereof), the Trust
shall be merged with and into the Corporation in accordance with this Agreement
and the separate existence of the Trust shall thereupon cease (the "Merger").
The Corporation shall be the surviving entity in the Merger and shall change
its name to "Property Capital Trust, Inc." (sometimes hereinafter referred to
as the "Surviving Corporation"). The Merger shall have the effects specified in
Section 3-114 of the MGCL.
Section 1.2 The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at
the offices of Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts
02109 at 9:59 a.m., local time, on the business day on which the last of the
conditions set forth in Article 5 shall be fulfilled or waived in accordance
herewith or (b) at such other time, date or place as the parties hereto may
agree. The date on which the Closing occurs is hereinafter referred to as the
"Closing Date."
Section 1.3 Effective Time. If all the conditions to the Merger set forth in
Article 5 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 7, the parties
hereto shall cause Articles of Merger satisfying the requirements of the MGCL
to be properly executed, verified and delivered for filing in accordance with
the MGCL on the Closing Date. The Merger shall become effective upon the
acceptance for record of the Articles of Merger by the State Department of
Assessments and Taxation of Maryland in accordance with the MGCL or at such
later time which the parties hereto shall have agreed upon and designated in
such filing in accordance with applicable law as the effective time of the
Merger (the "Effective Time").
ARTICLE 2. CHARTER AND BY-LAWS OF SURVIVING CORPORATION
Section 2.1 Charter. The Charter (as defined in the MGCL) of the Corporation
in effect immediately prior to the Effective Time shall be the Charter of the
Surviving Corporation, until duly amended in accordance with applicable law.
Section 2.2 By-laws. The By-laws of the Corporation in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
until duly amended in accordance with applicable law.
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ARTICLE 3. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION
Section 3.1 Directors. The directors of the Surviving Corporation in office
at and as of the Effective Time to serve for terms expiring at the annual
meeting of shareholders of the Surviving Corporation held in the calendar year
indicated shall be those persons identified below:
<TABLE>
<CAPTION>
1999 2000 2001
---- ---- ----
<S> <C> <C>
Bruce A. Beal Robert L. Beal Michael A. Manzo
</TABLE>
Section 3.2 Officers. The officers of the Surviving Corporation in office at
and as of the Effective Time to serve until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the charter and the by-laws of the Surviving
Corporation shall be those persons identified below:
Bruce A. Beal, President
Michael A. Manzo, Treasurer
Robert L. Beal, Secretary
ARTICLE 4. EFFECT ON SECURITIES
Section 4.1 Conversion of Shares of the Trust.
(a) At the Effective Time, each share of beneficial interest, no par value
per share, of the Trust (the "Shares") outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the
part of the Trust, the Corporation or the holders of any of the securities of
either entity, be converted into the right to receive:
(i) a cash payment equal to the quotient obtained by dividing the
algebraic sum of:
(w) all cash and cash equivalents held by the Trust on the
Effective Date, including rent and interest received in respect of
the land underlying the Cincinnati Marriott and the subordinate
leasehold mortgages thereon (the "Cincinnati Property"), PLUS
(x) the proceeds from the sale of the Cincinnati Property, if such
property is sold by the Effective Date but the proceeds of such
sale have not been distributed, net of all expenses reasonably
related thereto except overhead and similar expenses, MINUS
(y) the aggregate amount that the Trust is obligated to repay to
The Beal Companies Inc. pursuant to Section 1.2(b)(iii) of the
Investment Agreement; minus
(z) the aggregate amount payable pursuant to the Rights Agreement
dated September 28, 1990 between the Trust and State Street Bank
and Trust Company (the "Rights Agreement") upon termination
thereof, including amounts due in connection with the redemption of
all outstanding preemptive or similar rights to subscribe for
shares of capital stock of the Trust or any successor of the Trust,
including the Company,
by the number of shares of the Trust outstanding on the Effective Date
(together, the "Cash Consideration");
(ii) one-sixtieth of a share of the common stock, par value $.01 per
share, of the Corporation (the "Corporation Common Stock"); and
(iii) one Contingent Payment Right (as defined below) (the Cash
Consideration, the Corporation Common Stock and the Contingent Payment
Right are collectively referred to as the "Merger Consideration").
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(b) A "Contingent Payment Right" represents the right of a shareholder of the
Trust (who is such immediately prior to the Effective Time) to receive such
shareholder's pro-rata share (based on the number of shares of the Trust held
by such shareholder immediately prior to the Effective Time) of the sum of (x)
the net proceeds (as such are described in subsection (a)) from the sale of the
Cincinnati Property, if such sale is effected on or after the Effective Date,
and (y) the amount payable to the Trust or the Corporation, subject to
reduction for reasonably related costs (other than overhead and similar
expenses), by the Department of Transportation of the State of Florida as
compensation for the taking of a portion of Loehmann's Fashion Island located
in Aventura, Florida, less any expenses incurred by the Holders' Representative
as set forth in the following paragraph (such sum hereinafter referred to as
the "Contingent Payment"). Immediately prior to the Effective Time, the Trust
will assign all of its rights to the Contingent Payment to an escrow agent (the
"Escrow Agent") and provide such Escrow Agent with a list of shareholders of
the Trust entitled to Contingent Payment Rights as of the Effective Time. The
Escrow Agent, promptly after its receipt of any distributions in respect of
such Contingent Payment, will distribute such distributions, net of any fees of
such Escrow Agent and net of such Escrow Agent's costs and expenses in acting
as escrow agent, pro rata to the holders of Contingent Payment Rights. The
rights of the holders of the Contingent Payment Rights to receive funds from
the Escrow Agent shall be represented by the Escrow Agreement (the "Escrow
Agreement") to be executed by and between the Trust and the Escrow Agent. The
Contingent Payment Rights will not be assignable or transferable except by
operation of law and will not be evidenced by any certificate or other
instrument. The Contingent Payment Rights will not pay any dividends or bear
any stated rate of interest and will have no voting or other rights. The
Contingent Payment Rights will represent only the contingent right to receive a
pro rata portion of the Contingent Payment as described in this Section 4.1(b).
By approving the Merger, the recipients of Contingent Payment Rights
designate Robert M. Melzer as their representative (the "Holders'
Representative") and authorize him to take all action necessary in connection
with the distribution of the Contingent Payment, or the settlement of any
dispute related thereto. All decisions and actions by the Holders'
Representative shall be binding upon all of the holders of Contingent Payment
Rights, and no Holder shall have the right to object, dissent, protest or
otherwise contest the same. The Surviving Corporation shall be able to rely
conclusively on the instructions and decisions of the Holders' Representative
as to any actions required or permitted to be taken by the holders of
Contingent Payment Rights or the Holders' Representative hereunder, and no
holder of Contingent Payment Rights hereunder shall have any cause of action
against the Surviving Corporation for any action taken by the Surviving
Corporation in reliance upon the instructions or decisions of the Holders'
Representative. All expenses incurred by the Holders' Representative in
connection with the collection of amounts from the State of Florida and the
distribution of the Contingent Payment shall be deducted from the Contingent
Payment before the Contingent Payment is distributed to the holders of the
Contingent Payment Rights and such amount shall be used to reimburse the
Holders' Representative for such expenses. In addition, the Holders'
Representative shall be indemnified, to the extent permitted by the Charter of
the Surviving Corporation, by the Surviving Corporation for all loss, expense
or liability (including reasonable attorney's fees and expenses) that (i) prior
to the distribution of the Contingent Payment, exceeds the amount of the
Contingent Payment and (ii) following the distribution of the Contingent
Payment, arises out of or in connection with such distribution to the extent
and in the same manner as if the Holders' Representative was acting as an
officer of the Surviving Corporation. The Holders' Representative shall be
deemed to be an express third party beneficiary of the provisions of this
Section 4.1(b).
(c) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time, all Shares of the Trust shall cease to
be outstanding, shall be canceled and retired and shall cease to exist and each
holder of a certificate representing any Shares shall thereafter cease to have
any rights with respect to such Shares, except the right to receive, without
interest, the Merger Consideration in accordance with Sections 4.1(a) and
4.1(b) upon the surrender of such certificate.
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(d) Each outstanding option to purchase Shares of the Trust shall be either
exercised and exchanged for Shares of the Trust prior to the Effective Time or
canceled in accordance with its terms prior to the Effective Time. The
provisions in any plan, program or arrangement providing for the issuance or
grant of any interest in respect of the Shares of the Trust shall be canceled
as of the Effective Time.
(e) Each Share issued and held in the Trust's treasury at the Effective Time,
if any, by virtue of the Merger, shall cease to be outstanding, shall be
canceled and retired and shall cease to exist and no payment of any
consideration shall be made with respect thereto.
(f) At the Effective Time, each share of Corporation Common Stock issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Corporation or the holder of
such shares, be canceled and retired without payment of any consideration
therefor.
Section 4.2 Exchange of Certificates Representing Shares.
(a) As of the Effective Time, the Corporation shall deposit, or shall cause
to be deposited, with an exchange agent selected by the Corporation on or prior
to the Effective Time (the "Exchange Agent"), for the benefit of the holders of
Shares, for exchange in accordance with this Article 4, certificates
representing the shares of Corporation Common Stock and the Cash Consideration
(such cash and certificates being hereinafter referred to as the "Exchange
Fund") to be issued pursuant to Section 4.1 and paid pursuant to this Section
4.2 in exchange for outstanding Shares.
(b) Promptly after the Effective Time, the Corporation shall cause the
Exchange Agent to mail to each holder of record of a certificate or
certificates representing Shares (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to such
certificates shall pass, only upon delivery of such certificates to the
Exchange Agent and shall be in such form and have such other provisions as the
Corporation may reasonably specify, (ii) any other required documents, (iii)
instructions for use in effecting the surrender of such certificates in
exchange for certificates representing shares of Corporation Common Stock and
the Cash Consideration, (iv) a description of the Contingent Payment Right and
(v) a description of the Escrow Agreement. Upon surrender of a certificate
representing Shares for cancellation to the Exchange Agent together with such
letter of transmittal, duly executed and completed in accordance with the
instructions thereto, the holder of such certificate shall be entitled to
receive in exchange therefor (x) a certificate representing the number of whole
shares of Corporation Common Stock to which such holder shall be entitled and
(y) a check representing the Cash Consideration, plus the amount of any
dividends, or distributions, if any, pursuant to paragraph (c) below, after
giving effect to any required withholding tax, and the certificate for Shares
so surrendered shall forthwith be canceled. No interest will be paid or accrued
on the dividend or distribution, if any, payable to holders of certificates
representing Shares pursuant to this Section 4.2. In the event of a transfer of
ownership of Shares which is not registered in the transfer records of the
Trust, a certificate representing the proper number of shares of Corporation
Common Stock, together with a check for the Cash Consideration plus, to the
extent applicable, the amount of any dividend or distribution, if any, payable
pursuant to paragraph (c) below, may be issued to such a transferee if the
certificate representing Shares of the Trust is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and to evidence that any applicable stock transfer taxes have been
paid.
(c) Notwithstanding any other provisions of this Agreement, no dividends or
other distributions on Corporation Common Stock shall be paid with respect to
any Shares represented by a certificate until such certificate is surrendered
for exchange as provided herein; provided, however, that subject to the effect
of applicable laws, following surrender of any such certificate, there shall be
paid to the holder of the certificates representing whole shares of Corporation
Common Stock issued in exchange therefor, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time theretofore payable with respect to such whole
shares of Corporation Common Stock and not paid, less the amount of any
withholding taxes which may be required thereon, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a record date
after the Effective Time but prior to surrender
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and a payment date subsequent to surrender payable with respect to such whole
shares of Corporation Common Stock, less the amount of any withholding taxes
which may be required thereon.
(d) At and after the Effective Time, there shall be no transfers on the stock
transfer books of the Trust of the Shares which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for certificates for shares of Corporation Common Stock
in accordance with this Section 4.2.
(e) No fractional shares of Corporation Common Stock shall be issued pursuant
hereto. Each holder who would receive a fractional share of Corporation Common
Stock less than 0.5 of a share of Corporation Common Stock shall receive no
Corporation Common Stock in respect of such fraction and each holder who would
receive a fractional share of Corporation Common Stock equal or greater to 0.5
shall receive one (1) share of Corporation Common Stock in respect of such
fraction.
ARTICLE 5. CONDITIONS TO CLOSING
The respective obligations of the Trust and the Corporation to consummate the
Merger are subject to the following conditions:
Section 5.1 Shareholder Approval. This Agreement shall be approved (i) by the
holders of two-thirds of the Shares of beneficial interest of the Trust and
(ii) by the Trust as sole stockholder of the Corporation, in accordance with
applicable law and the charter and the by-laws of the Corporation.
Section 5.2 Investment Agreement. The Investment Agreement shall have been
executed by all parties thereto.
Section 5.3 Merger Agreement. The Contribution and Merger Agreement by and
between Property Capital Trust Limited Partnership, a Massachusetts limited
partnership ("PCT LP"), and FYA pursuant to which PCT LP shall merge into FYA
shall have been executed.
Section 5.4 Satisfaction of Obligations. Prior to the Effective Time, the
Trust shall have satisfied all obligations of the Trust related to (i) the
bonus plans, compensation plans and other employee benefit plans listed on
Schedule 3.17 of the Investment Agreement and (ii) any out of pocket expenses
incurred by the Trust in connection with the transactions contemplated
hereunder and under the other Transaction Documents that are not reimbursable
pursuant to Section 11.10 of the Investment Agreement. In the event cash and
cash equivalents held by the Trust as of the Effective Time are insufficient to
satisfy such obligations of the Trust, the Contingent Payment shall be reduced
by the amount of such obligations.
ARTICLE 6. INDEMNIFICATION
Section 6.1 No Modification. The Surviving Corporation's Charter, the
Surviving Corporation's By-laws and the operating partnership agreement (the
"Partnership Agreement") of FYA to be in effect immediately after the merger of
PCT LP into FYA pursuant to Article 2 of the Contribution and Merger Agreement
by and between PCT LP and FYA shall each contain provisions with respect to
indemnification incorporating the terms and conditions set forth in Section 6.2
hereof, which provisions shall not be amended, repealed or otherwise modified
for a period of six (6) years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who at or before the
Effective Time were trustees, officers, employees, shareholders or agents of
the Trust, unless such modification is required by law.
Section 6.2 Indemnification. The Surviving Corporation and/or FYA, as
applicable, to the fullest extent permitted under the Surviving Corporation's
Charter or such entity's By-laws, and FYA as the surviving partnership after
the merger of PCT LP into FYA, to the fullest extent permitted under the
Partnership
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Agreement, shall indemnify and hold harmless, each present and former trustee,
officer, employee or shareholder (in connection with the affairs of the Trust)
of the Trust (collectively, the "Indemnified Parties") against any costs or
expenses (including attorneys fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, (i) arising out of or pertaining to the
transactions contemplated by this Agreement or (ii) otherwise with respect to
any acts or omissions occurring at or prior to the Effective Time for a period
of six (6) years after the date hereof. In the event of any such claim, action,
suit, proceeding or investigation (whether arising before or after the
Effective Time), (x) the Surviving Corporation and/or FYA, as applicable, shall
promptly pay expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by law, (y) at its election, the Surviving Corporation and/or FYA, as
applicable, shall be entitled to control the defense of any claim, suit,
proceeding or investigation, provided that the Surviving Corporation and/or
FYA, as applicable, shall acknowledge liability to the Indemnified Party for
such claim, suit, proceeding or investigation under this Section 6.2, and, to
the extent the Surviving Corporation and/or FYA, as applicable, so elects, it
may select the counsel for such purpose (provided that such counsel shall be
reasonably satisfactory to the Indemnified Party and that the Indemnified Party
shall have the right to employ separate counsel, but the fees and expenses of
such counsel shall be at the Indemnified Party's expense unless in such claim
or action the Indemnified Party reasonably concludes, based upon advice of
legal counsel, that there is a conflict between the positions of the Surviving
Corporation and/or FYA, as applicable, and the Indemnified Party, or between
the Indemnified Party and other Indemnified Parties that would preclude or
render inadvisable joint or multiple representation of such parties, in which
case if the Indemnified Party notifies the Surviving Corporation and/or FYA, as
applicable, the Surviving Corporation and/or FYA, as applicable, shall not have
the right to assume such defense of such action on behalf of the Indemnified
Party and the Surviving Corporation and/or FYA, as applicable, shall pay the
reasonable fees and expenses of counsel for the Indemnified Party; provided,
however, that the Surviving Corporation and/or FYA, as applicable, shall not be
required to pay the fees and expenses of more than one separate counsel for all
Indemnified Parties unless there is under applicable standards of professional
conduct, a conflict between the positions of any two or more Indemnified
Parties that would preclude or render inadvisable joint or multiple
representation of such parties). Any Indemnified Party wishing to claim
indemnification under this Section 6.2, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Surviving
Corporation and/or FYA, as applicable, thereof, provided that the failure to so
notify shall not affect the obligations of the Surviving Corporation except to
the extent such failure to notify materially prejudices such party; and (z) the
Indemnified Parties and the Surviving Corporation and/or FYA, as applicable,
will cooperate in the defense of any such matter; provided, however, that the
Surviving Corporation and/or FYA, as applicable, shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld) and the Surviving Corporation and/or FYA, as applicable,
shall not enter into a settlement without the consent of the Indemnified Party
unless such settlement contains complete exoneration of the Indemnified Party;
and provided; further, that in the event that any claim or claims for
indemnification are asserted or made within such ten-year period, all rights to
indemnification in respect of any such claim or claims shall continue until the
disposition of any and all such claims.
Section 6.3 Additional coverage. At or prior to the Effective Time, the
Corporation shall purchase or keep in effect directors' and officers' liability
insurance coverage for the Trust's trustees and officers in a form reasonably
acceptable to the Trust which shall provide such Trustees and officers with so-
called tail or other coverage for six (6) years following the Effective Time of
not less than the existing coverage under, and have other terms not
substantially less favorable to the insured persons than, the directors' and
officers' liability insurance coverage presently maintained by the Trust.
Section 6.4 Third-party rights. This Article 6 is intended for the
irrevocable benefit of, and to grant third party rights to, the Indemnified
Parties and shall be binding on all successors and assigns of the Surviving
Corporation. Each of the Indemnified Parties shall be entitled to enforce the
covenants contained in this Article 6. The provisions for indemnification
contained in this Section Article 6 are not intended to be exclusive and are
without prejudice to any other rights to indemnification or advancement of
funds which any Indemnified Party may otherwise have.
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ARTICLE 7. TERMINATION
The parties may terminate this Agreement by mutual written consent at any
time prior to the Effective Time. Upon such termination, no party hereunder
shall have any further rights or obligations pursuant to this Agreement. In
addition, the Merger Agreement shall be terminated if, and as such time as, the
Investment Agreement is terminated.
ARTICLE 8. MISCELLANEOUS
Section 8.1 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties and
supersedes any prior understandings, agreements or representations by or
between the parties, written or oral, to the extent they related in any way to
the subject matter hereof.
Section 8.2 Succession and Assignment; Third-Party Rights. This Agreement
shall be binding upon and inure to the benefit of the parties named herein and
their respective successors and permitted assigns. No party may assign either
this Agreement or any of its rights, interests or obligations hereunder without
the prior written approval of the other Party. Except as expressly provided in
Article 6 and Section 4.1(b), nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.
Section 8.3 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 8.4 Headings. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic laws of The Commonwealth of Massachusetts
without giving effect to any choice or conflict of law provision or rule
(whether of the Commonwealth of Massachusetts or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
Commonwealth of Massachusetts.
Section 8.6 Amendments. No amendment of any provision of this Agreement shall
be valid unless the same shall be in writing and signed by both parties.
Section 8.7 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
Section 8.8 Expenses. Subject to Section 11.10 of the Investment Agreement,
each of the parties will bear its own costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby.
Section 8.9 Service of Process. The Corporation may be served with process in
the State of Maryland in any proceeding for the enforcement of any obligation
of the Trust, as well as for enforcement of any obligations of the Corporation
arising from the Merger, and it does hereby irrevocably appoint the Secretary
of State of the State of Maryland as its agent to accept service of process in
any such suit or other proceedings. The address to which a copy of such process
shall be mailed by the Secretary of State to the Corporation is 101 Federal
Street, Boston, MA 02110.
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Section 8.10 Exculpation. The parties to this Agreement acknowledge and agree
that the obligations of the Trust hereunder do not and shall not constitute
personal obligations of the Trustees, officers, employees or shareholders of
the Trust, or any of them, and shall not involve any claim against or personal
liability on any of them, and the parties to this Agreement agree to look only
to the assets of the Trust in respect thereof and not to seek recourse against
such Trustees, officers, employees or shareholders or any of them or their
personal assets for such satisfaction.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on as of
the date first above written.
PROPERTY CAPITAL TRUST
By: /s/ Robert M. Melzer
___________________________________
Name: Robert M. Melzer
Title: President and Chief Executive
Officer
MARYLAND PROPERTY CAPITAL TRUST,
INC.
By: /s/ Bruce A. Beal
___________________________________
Name: Bruce A. Beal
Title: President
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ANNEX B
ROLL-UP TRANSACTION
INDIVIDUAL SUPPLEMENT
INTRODUCTION
Pursuant to the requirements of Rules 901 and 902 of the regulations (the
"Regulations") promulgated under the Securities Act of 1933, as amended, and
the Securities Exchange Act of 1934, as amended, this Individual Supplement is
being provided to the shareholders ("Shareholders") of Property Capital Trust
(the "Trust") in connection with the merger (the "Merger") of the Trust into
Maryland Property Capital Trust, Inc., a wholly-owned subsidiary of the Trust
(the "Corporation"). As a result of the Merger, the Trust's organizational
structure will be converted from that of a Massachusetts business trust to a
Maryland corporation. This Individual Supplement is attached as Annex B to the
Proxy Statement being distributed to the Shareholders in connection with the
Merger. This Individual Supplement also is a part of the Registration Statement
on Form S-4 filed by the Corporation with the Securities and Exchange
Commission (together with the Proxy Statement, the "Proxy
Statement/Prospectus") covering approximately 159,737 shares of common stock
(the "Corporation Common Stock") of the Corporation that the Corporation will
issue to the Shareholders of the Trust upon the consummation of the Merger. No
individual supplement, however, has been prepared for the Corporation because
the Trust is the sole shareholder of the Corporation.
The Trust will provide you without charge, upon your or your representative's
written request, additional copies of this Individual Supplement. Please direct
your requests for such copies to: Property Capital Trust, 177 Milk Street,
Suite 14B, Boston, MA 02109, Attention: Robert M. Melzer, President (telephone:
(617) 482-4081). The Trust will deliver such copies by first class mail or
other equally prompt means.
This Individual Supplement does not repeat information that you can find in
the Proxy Statement/Prospectus of which this Individual Supplement is a part.
All cross references contained herein refer to such Proxy Statement/Prospectus
and any term used herein and not defined shall have the meaning ascribed to
such term in the Proxy Statement/Prospectus. The Trust urges you to read such
Proxy Statement/Prospectus, including Annex A attached thereto, carefully.
The Merger may affect Shareholders of the Trust in different ways depending
on each Shareholder's personal investment or tax circumstances. You should be
aware that there are certain risks involved with the Merger and with holding
shares of Corporation Common Stock. For a detailed description of each material
risk and effect of the Merger see "RISK FACTORS (see pages 9-15)" and "FEDERAL
INCOME TAX CONSEQUENCES TO SHAREHOLDERS (see pages 34-35)."
SUMMARY
In furtherance of the Business Plan that the Trust adopted and the
Shareholders ratified in 1995 (the "Business Plan"), the Trust has disposed of
all of its real estate assets. As a result of doing so, the Trust has
accumulated cash in the form of proceeds from the sales of those assets. From
those proceeds, the Trust has distributed an aggregate amount of $13.65 per
share in special dividends to the Shareholders. For a more detailed discussion
of the relationship between the Business Plan and the special dividends the
Trust has declared in the last three years, see "THE MERGER--Background and
Reasons for the Merger (see pages 20-21);" "MARKET PRICES AND CASH DIVIDENDS
INFORMATION (see page 65);" and "SELECTED FINANCIAL INFORMATION--The Trust (see
page 52) ."
As the Trust approached the disposal of the last of its tangible assets, the
Trustees were forced to consider various alternatives to enable the Trust to
terminate. The two principal alternatives were to establish a liquidating
trust, or to engage in a merger of this type. The Trustees, in their
independent business judgment, opted for this Merger because: (i) the Merger
obviates the need to establish a liquidating trust, which would have delayed
receipt by you of a final distribution, (ii) the Trustees will be able to
distribute to the
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Shareholders approximately $.23 per share shortly after consummation of the
Merger, whereas a liquidating trust would have held a substantial portion of
these funds in reserve, delaying this kind of distribution to you, (iii) as a
result of the Merger, the Corporation will assume the Trust's liabilities,
without consuming any of the Trust's assets, and (iv) the Shareholders, will
receive the benefit, if any, of the Contingent Payment Right.
As a Shareholder, your ownership interest will change. You will no longer
have an equity interest in the Trust because the shares of the Trust will cease
to be outstanding. Instead, you will have the right to receive the merger
consideration, described below, and you will have an on-going minority interest
in the Corporation. For a summary of the transactions contemplated by the
Trust, see "SUMMARY INFORMATION (see pages 1-7)."
Under the terms of the Merger Agreement between the Trust and the
Corporation, the Trust will merge into the Corporation, and the Corporation
will be the surviving entity. As a result of the Merger, you will receive (i)
one-sixtieth share of the Corporation Common Stock for each share of the Trust
you hold, with one share of Corporation Common Stock exchanged for any
fractional interest you hold that is greater than or equal to .5 (no shares of
Corporation Common Stock or cash in lieu thereof will be issued for fractional
interests of Corporation Common Stock less than .5), and (ii) a Contingent
Payment Right. For a detailed description of the terms of the Merger Agreement,
see "THE MERGER AGREEMENT--Consideration to be Paid in the Merger (see page
24)," and "THE MERGER--Background and Reasons for the Merger (see pages 20-
21)."
In connection with the Related Transaction in which Framingham York
Associates ("FYA") will purchase Corporation Common Stock, FYA will place a
mortgage financing of $1 million on the property located at 51 New York Avenue,
Framingham, Massachusetts, which will become the Corporation's sole asset after
Property Capital Trust Limited Partnership merges into FYA. For a more detailed
description of the Related Transactions and of this financing arrangement in
particular, see "THE MERGER--Related Transactions (see pages 22-23)," and "THE
CORPORATION--Description of the Property--Financing (see page 30)."
Interests in the Corporation will be allocated to the current Shareholders of
the Trust according to the number of shares of the Trust that each Shareholder
owns before the Merger. For the purposes of determining the allocation of
interests in the Corporation following the Merger, the valuation of the trust
was based on the fact that, pursuant to the Trust's Business Plan, the Trust
has successfully divested itself of all of its real estate assets. The only
assets that the Trust holds are the cash it has on hand from the sales of all
of its assets and the Contingent Payment Right, all of which will be
distributed to you as part of the Merger. Accordingly, the shares of
Corporation Common Stock that will be owned by the current Shareholders of the
Trust after the Merger represent the continued ownership interest in the
Corporation. For more information on the Trust's assets and its value, see "THE
MERGER--Information Regarding the Parties--Property Capital Trust (see page
18)."
The relative ownership of the Corporation by the current Shareholders
following the Merger and the Related Transactions is the result of arm's length
negotiations between the Board of Trustees of the Trust and FYA, and is based
on the fair market value of the property owned by FYA, compared to the value of
the goodwill and other intangible assets of the Trust, in the absence of real
estate or other tangible assets. For a detailed discussion of the Trust's
pursuit of its Business Plan and of the Board's deliberations and negotiations
in entering into this Merger, see "THE MERGER--Background and Reasons for the
Merger (see pages 20-21)," and "--Information Regarding the Parties (see page
18)."
There are several important reasons for this Merger, many of which stem from
the fact that, in accordance with its Business Plan, the Trust has disposed of
all of its tangible assets and now holds only intangible assets. For example,
shortly after consummation of the Merger, the Trust will make a distribution to
its Shareholders of the remaining proceeds from the disposition of its real
estate assets, the Shareholders will receive the benefit of the Contingent
Payment Right, which is payable in the event of a favorable resolution to
pending litigation.
Given appropriate market conditions, the Corporation intends to pursue growth
opportunities through the acquisition of existing properties, the development
of new properties, management of existing properties,
B-2
<PAGE>
adding new equity capital and acquisitions of and mergers with other real
estate companies. There is no assurance that the Corporation will achieve any
growth through the pursuit of these opportunities. For a more detailed
description of the Corporation's growth strategies, see "THE CORPORATION--
Business and Growth Strategy (see pages 28-29)."
There are few material risks involved in this Merger. Such risks do include,
however, changes in the cash distribution policies and changes in the nature
and extent of your ownership interest. For a detailed description of these
risks, see "RISK FACTORS--Risk of Ownership in Becoming Stockholders in the
Corporation (see pages 9-10)," and "COMPARISON OF SHAREHOLDERS' RIGHTS--
Distribution to Shareholders (see page 38)." Furthermore, there are persons
involved in this transaction whose interests may be different from, or in
conflict with yours. For a detailed description of the interests of these
individuals and how they may differ from yours, see "RISK FACTORS--Interests of
Certain Directors and Officers of the Corporation and Trustees of the Trust in
the Merger (see page 9)," and "THE MERGER--Interests of Certain Persons in the
Merger (see pages 21-22)."
The Trustees of the Trust have unanimously determined that this Merger is
fair to and in the best interests of the Shareholders. For a detailed
discussion on the Trustees' deliberations on entering into this transaction,
see "THE MERGER--Recommendation of the Board of Trustees (see page 20)," and
"--Background and Reasons for the Merger (see pages 20-21)."
You are not entitled to exercise dissenters' rights of appraisal or other
dissenters' rights under either Massachusetts law or Maryland law with respect
to the Merger or any transactions contemplated thereby. See "COMPARISON OF
SHAREHOLDERS' RIGHTS--Limitation on Dissenters' Appraisal Rights--The Trust
(see page 39)."
RISK FACTORS AND OTHER CONSIDERATIONS
Because the Corporation Common Stock you will receive as a result of the
Merger will initially and for the foreseeable future have no significant, if
any, value, there are few practical risks to the Merger. These risks include,
among other things, the impact of the transaction on the Corporation's ability
to make distributions to you, and the inherent risks of real estate
investments, as well as the risks that are specifically associated with the
property which will become the Corporation's sole asset after the Related
Transactions are consummated, and the Corporation's election to be treated as a
REIT. However, these risks will only be meaningful if, in the future, the
Corporation is successful in diversifying its portfolio and as a consequence,
your shares of Corporation Common Stock will increase in value. For a detailed
discussion of the these and other risks, see "RISK FACTORS--Distributions
Dependent on Growth, (see page 9)," "--Risk of Ownership in Becoming
Stockholders of the Corporation (see pages 9-10)," "--Real Estate Investment
Risks (see pages 10-13)," "-- Federal Income Tax Risks--Failure to Qualify as a
Real Estate Investment Trust (see page 14)," and "--Lack of Operating History
as a REIT (see page 15)."
COMPARATIVE INFORMATION
The Shareholders' voting rights are substantially similar under the governing
instruments and the applicable law for both the Trust and the Corporation.
There are subtle differences that, in many cases, are attributable to the
organizational differences between the Trust and the Corporation. For a
description of these similarities and differences, see "COMPARISON OF
SHAREHOLDERS' RIGHTS (see pages 37-42)."
The fiduciary duties that the Board of Trustees of the Trust owe to the
Shareholders of the Trust are substantially the same as the fiduciary duties
that the officers and directors of the Corporation will owe to the holders of
the Corporation Common Stock. The Trustees and management of the Trust will not
be officers or directors of the Corporation following the Merger. For more
information about Trustees, officers and directors after the Merger, see "THE
MERGER AGREEMENT--Indemnification (see pages 26-27)."
B-3
<PAGE>
The officers and directors of the Corporation will receive nominal salaries
and fees in exchange for their services to the Corporation. In addition, Mr.
Melzer, President of the Trust and a Trustee, has been appointed as the
Holders' Representative in all matters related to the Contingent Payment Right.
As such, Mr. Melzer will receive payment for his services and reimbursement for
the expenses he incurs in that capacity. For more information on Mr. Melzer's
and the other officer's and directors' compensation arrangements, see "THE
CORPORATION--Executive Compensation (see page 30)," and "THE MERGER--Interests
of Certain Persons in the Merger (see pages 21-22)."
The Trust has distributed an aggregate amount of $13.65 per share in special
dividends to the Shareholders. Under the Corporation's governing instruments,
the decision to make distributions to shareholders is solely in the discretion
of the Board of Directors, but the Corporation does not expect to make any
distributions to shareholders in the foreseeable future. For a more detailed
description of these policies, see "COMPARISON OF SHAREHOLDERS' RIGHTS--
Distribution to Shareholders, (see page 38)," and "THE CORPORATION--The
Partnership Agreement of the Operating Partnership (see page 33)."
Given appropriate market conditions, the Corporation intends to pursue growth
opportunities through the acquisition of existing properties, the development
of new properties, management of existing properties, adding new equity capital
and acquisitions of and mergers with other real estate companies. There is no
assurance that the Corporation will achieve any growth through the pursuit of
these opportunities. For a more detailed description of the Corporation's
growth strategies, see "THE CORPORATION--Business and Growth Strategy (see
pages 28-29)."
Certain Trustees and executive officers of the Trust have interests in the
Merger that may be different from, or contrary to yours. However, the Trust did
not retain the services of an unaffiliated representative to represent the
Shareholders' interests. An unaffiliated representative was unnecessary because
the Trust holds no tangible assets except for the remaining proceeds from the
sales of its real estate assets, all of which will be distributed to the
Shareholders, to the extent that such distribution is appropriate. Furthermore,
when the Trustees considered the available options for terminating the Trust,
the only alternative to this kind of Merger was to establish a liquidating
trust. The arrangement of a liquidating trust would have consumed part of the
Trust's cash assets, reducing the amount of the final distribution to the
Shareholders, in addition to delaying that final distribution. The Trustees, in
their independent business judgement, determined that the ability to distribute
all of the Trust's tangible assets to the current Shareholders of the Trust
without delay and continued ownership of shares of Corporation Common Stock
representing an interest in the possible future growth and diversification of
the Corporation, are in the best interests of the Shareholders. For more
information regarding the Trustees' deliberations on the fairness of this
transaction, see "THE MERGER--Background and Reasons for the Merger, (see pages
20-21)," and "--Recommendation of the Board of Trustees (see page 20)," and "--
Interests of Certain Persons in the Merger (see pages 21-22)."
SOURCE AND AMOUNT OF FUNDS AND TRANSACTIONAL EXPENSES
The consideration that will be paid to you as a result of this Merger will
consist of the shares of Corporation Common Stock that you will receive in
exchange for your shares of the Trust, and any Contingent Payment that may
result from the resolution of pending litigation. In addition, the Trust will
make a distribution to you out of the cash assets it holds from the sale of its
real estate assets. For a detailed description of these funds and the sources
of these funds, see "THE MERGER--Information Regarding the Parties--Property
Capital Trust (see page 18)," "--The Merger Consideration (see page 19)," "--
Contingent Payment Right (see page 19)," and "Cash Consideration (see page
19)."
There are fees and expenses associated with this Merger that you should
consider. The Corporation will receive $1 million from FYA in exchange for
319,489 shares of Corporation Common Stock pursuant to one of the Related
Transactions. The Corporation will contribute this $1 million to the Operating
Partnership, and as general partner of the Operating Partnership, the
Corporation will use it to pay the costs of the Merger. For information about
these fees and expenses and the Corporation's intention to pay the Merger
costs, see "THE
B-4
<PAGE>
MERGER AGREEMENT--Fees and Expenses (see page 25)," "THE MERGER--Related
Transactions (see page 22)," and "RISK FACTORS--Substantial Expenses and
Payments if the Merger or the Related Transactions Fail to Occur (see page
14)."
FEDERAL INCOME TAX CONSEQUENCES
As a Shareholder of the Trust you may experience certain Federal Income Tax
consequences as a result receiving the Merger consideration. For a detailed
description of some of the potential tax consequences, see "FEDERAL INCOME TAX
CONSEQUENCES TO SHAREHOLDERS (see pages 34-36)." THE TRUST URGES YOU TO CONSULT
WITH YOUR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER,
INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO
YOU OF THE MERGER.
B-5
<PAGE>
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS, TRUSTEES AND OFFICERS.
The MGCL permits a Maryland corporation to include in its charter a provision
limiting the liability of its directors and officers to the corporation and its
stockholders for money damages except for liability resulting from (a) actual
receipt of an improper benefit or profit in money, property or services or (b)
active and deliberate dishonesty established by a final judgment as being
material to the cause of action. The Articles of Incorporation of the
Corporation contains such a provision which eliminates such liability to the
maximum extent permitted by Maryland law.
The Charter Documents limit the liability of the Corporation's directors and
officers to the Corporation and its Stockholders to the fullest extent
permitted from time to time by Maryland law. Maryland law permits the liability
of directors and officers to a corporation or its Stockholders for money
damages to be limited, except (i) to the extent that it is proved that the
director or officer actually received an improper benefit or profit, or (ii) if
a judgment or other final adjudication is entered in a proceeding based on a
finding that the director's or officer's action or failure to act was the
result of active and deliberate dishonesty and was material to the cause of
action adjudicated in the proceeding. This provision does not limit the ability
of the Corporation or its Stockholders to obtain other relief, such as an
injunction or restriction.
The Corporation's Bylaws require the Corporation to indemnify its directors,
officers and certain other parties to the fullest extent permitted from time to
time by Maryland law. The MGCL permits a corporation to indemnify its
directors, officers and certain other parties against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service to or at the request of the corporation, unless it is established
that the act or omission of the indemnified party was material to the matter
giving rise to the proceeding and (i) the act or omission was committed in bad
faith or was the result of active and deliberate dishonesty, (ii) the
indemnified party actually received an improper personal benefit, or (iii) in
the case of any criminal proceeding, the indemnified party had reasonable cause
to believe that the act or omission was unlawful. It is the position of the
Securities and Exchange Commission that indemnification of directors and
officers for liabilities arising under the Securities Act is against public
policy and is unenforceable pursuant to Section 14 of the Securities Act.
The MGCL requires a corporation (unless its charter provides otherwise, which
the Company's charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the
director or officer was material to the matter giving rise to the proceeding
and (i) was committed in bad faith or (ii) was the result of active and
deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. However, a Maryland corporation
may not indemnify for an adverse judgment in a suit by or in the right of the
corporation. In addition, the MGCL requires the Company, as a condition to
advancing expenses, to obtain (a) a written affirmation by the director or
officer of good faith belief that he has met the standard of conduct necessary
for indemnification by the company as authorized by the Bylaws and (b) a
written statement by or on his behalf to repay the amount paid or reimbursed by
the Company if it shall ultimately be determined that the standard of conduct
was not met.
The Declaration of Trust of the Trust provides that no Trustee, officer,
agent or representative of the Trust shall be personally responsible for any
loss or damage to Trust property or to the interests of the Shareholders by
reason of any act or omission done or made in good faith and provides that each
such person and each
II-1
<PAGE>
Shareholder of the Trust shall be fully indemnified by the Trust for any
personal liability incurred in connection with the administration, property or
affairs of the Trust except liability from such person's own willful breach of
trust knowingly and intentionally committed. The Declaration of Trust also
provides that all persons shall look only to the Trust property for
satisfaction of claims of any nature arising in connection with the affairs of
the Trust and that no Shareholder, Trustee, officer, agent or representative of
the Trust shall have any personal liability in connection with the property or
affairs of the Trust.
The Trust has a directors and officers liability insurance policy that
insures the Trustees and officers of the Trust against loss from claimed
wrongful acts and insures the Trust for indemnifying the Trustees and officers
against such loss. The policy limit of liability is $3,000,000 each policy year
and is subject to retentions for each loss of $1,000 for each Trustee and
officer and of $100,000 for the Trust. The Corporation intends to maintain a
policy with similar benefits to its directors and officers and that also will
cover the Trustees and officers of the Trust for a period of six years from the
Effective Time.
ITEM 21. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*2.2 Agreement and Plan of Merger dated June 18, 1998, as amended,
between Maryland Property Capital Trust and Maryland Property
Capital Trust, Inc. (appended as Annex A to Proxy
Statement/Prospectus)
*3.1 Form of Articles of Amendment and Restatement of Property Capital
Trust, Inc.
*3.2 Form of By-laws of Maryland Property Capital Trust, Inc.
*4.1 Form of Second Amended and Restated Agreement of Limited
Partnership of Property Capital Trust Limited Partnership
**4.2 Form of Certificate representing shares of Common Stock of
Property Capital Trust, Inc.
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to legality of shares of
Common Stock of Maryland Property Capital Trust, Inc. (including
consent)
*10.1 Investment Agreement, dated June 18, 1998, among Maryland Property
Capital Trust, Inc., Property Capital Trust and Framingham York
Associates Limited Partnership
*10.2 First Amendment to Investment Agreement, dated August 7, 1998,
among Framingham York Associates Limited Partnership, Property
Capital Trust and Maryland Property Capital Trust, Inc.
*10.3 Second Amendment to Investment Agreement, dated October 16, 1998,
among Framingham York Associates Limited Partnership, Property
Capital Trust and Maryland Property Capital Trust, Inc.
*10.4 Contribution and Merger Agreement, dated October 16, 1998, between
Property Capital Trust Limited Partnership and Framingham York
Associates Limited Partnership and Maryland Property Capital
Trust, Inc. (solely for purposes of Sections 6.04 and 6.05)
*10.5 Form of Management Agreement between Beal & Company, Inc. and
Property Capital Trust Limited Partnership
*23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Ernst & Young LLP
*23.3 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1)
*24.1 Powers of Attorney (included on page II-5)
**99.1 Form of Proxy Card in connection with the Special Meeting
**99.2 Form of Letter of Transmittal to be used by Shareholders of the
Trust to exchange Share certificates following the Merger
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
(a)(1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use
of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of
Rule 145(c), the registrant undertakes that such reoffering prospectus
will contain the information called for by the applicable registration
form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other
items of the applicable form.
(2) The undersigned registrant undertakes that every prospectus: (i) that
is filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the Securities
Act of 1933 (the "Act") and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an amendment
to the registration statement and will not be used until such amendment
is effective, and that, for purposes of determining any liability under
the Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (the "Exchange Act") (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(c) The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is
sent or given, the latest annual report, to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange
Act; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver,
or cause to be delivered to each person to whom the prospectus is sent or
given, the latest quarterly report that is specifically incorporated by
reference in the prospectus to provide such interim financial information.
(d) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the provisions described under Item 20 above, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director, officer, or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(e) The undersigned registrant hereby undertakes that: (1) for purposes of
determining any liability under the Act, the information omitted from the
form of prospectus filed as part of this registration statement in reliance
upon Rule 430A and contained in a form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall
be deemed to be part of this registration statement as of the time it was
declared effective; and (2) for the purpose of determining any liability
under the Act, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Boston, Commonwealth of
Massachusetts, on November 20, 1998.
MARYLAND PROPERTY CAPITAL TRUST,
INC.
/s/ Bruce A. Beal
By: _________________________________
Bruce A. Beal, President
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of Maryland Property Capital
Trust, Inc., hereby severally constitute and appoint Robert L. Beal and Michael
A. Manzo, and each of them singly, our true and lawful attorneys with full
power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Registration Statement on Form S-4 filed
herewith and any and all pre-effective and post-effective amendments to said
Registration Statement, and any subsequent Registration Statement for the same
offering, and generally to do all such things in our names and on our behalf in
our capacities as officers and directors to enable Maryland Property Capital
Trust, Inc. to comply with the provisions of the Securities Act of 1933, as
amended, and all requirements of the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorneys, or any of them, to said Registration Statement and any and all
amendments thereto or to any subsequent Registration Statement for the same
offering.
Pursuant to the requirements of the Securities Act, this registration
statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE SIGNED
--------- ----- -----------
<S> <C> <C>
/s/ Bruce A. Beal President and Director November 20, 1998
_________________________________ [Principal Executive
Bruce A. Beal Officer]
/s/ Michael A. Manzo Treasurer and Director November 20, 1998
_________________________________ [Principal Financial and
Michael A. Manzo Accounting Officer]
/s/ Robert L. Beal Secretary and Director November 20, 1998
_________________________________
Robert L. Beal
</TABLE>
II-5
<PAGE>
Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
*2.2 Agreement and Plan of Merger dated June 18, 1998, as amended,
between Maryland Property Capital Trust and Maryland Property
Capital Trust, Inc. (appended as Annex A to Proxy
Statement/Prospectus)
*3.1 Form of Articles of Amendment and Restatement of Property Capital
Trust, Inc.
*3.2 Form of By-laws of Maryland Property Capital Trust, Inc.
*4.1 Form of Second Amended and Restated Agreement of Limited
Partnership of Property Capital Trust Limited Partnership
**4.2 Form of Certificate representing shares of Common Stock of
Property Capital Trust, Inc.
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to legality of shares of
Common Stock of Maryland Property Capital Trust, Inc. (including
consent)
*10.1 Investment Agreement, dated June 18, 1998, among Maryland Property
Capital Trust, Inc., Property Capital Trust and Framingham York
Associates Limited Partnership
*10.2 First Amendment to Investment Agreement, dated August 7, 1998,
among Framingham York Associates Limited Partnership, Property
Capital Trust and Maryland Property Capital Trust, Inc.
*10.3 Second Amendment to Investment Agreement, dated October 16, 1998,
among Framingham York Associates Limited Partnership, Property
Capital Trust and Maryland Property Capital Trust, Inc.
*10.4 Contribution and Merger Agreement, dated October 16, 1998, between
Property Capital Trust Limited Partnership and Framingham York
Associates Limited Partnership and Maryland Property Capital
Trust, Inc. (solely for purposes of Sections 6.04 and 6.05)
*10.5 Form of Management Agreement between Beal & Company, Inc. and
Property Capital Trust Limited Partnership
*23.1 Consent of Arthur Andersen LLP
*23.2 Consent of Ernst & Young LLP
*23.3 Consent of Goodwin, Procter & Hoar LLP (included in Exhibit 5.1)
*24.1 Powers of Attorney (included on page II-5)
**99.1 Form of Proxy Card in connection with the Special Meeting
**99.2 Form of Letter of Transmittal to be used by Shareholders of the
Trust to exchange Share certificates following the Merger
</TABLE>
- --------
* Filed herewith.
** To be filed by amendment.
<PAGE>
EXHIBIT 3.1
FORM OF
ARTICLES OF
AMENDMENT AND RESTATEMENT
OF
MARYLAND PROPERTY CAPITAL TRUST, INC.
Dated: __________, 1999
<PAGE>
FORM OF
ARTICLES OF
AMENDMENT AND RESTATEMENT
OF
MARYLAND PROPERTY CAPITAL TRUST, INC.
THIS IS TO CERTIFY THAT:
FIRST: Maryland Property Capital Trust, Inc., a Maryland corporation with
-----
its principal office in the State of Maryland and its resident agent as set
forth below in Articles IV and V, respectively, of these Articles of Amendment
and Restatement, desires to amend and restate its charter as filed with the
State Department of Assessments and Taxation on June 15, 1998, as set forth in
these Articles of Amendment and Restatement.
SECOND: The following provisions are all of the provisions of the charter
------
currently in effect as hereinafter amended.
ARTICLE I
INCORPORATION
-------------
Eugenia B. Bettencourt, whose post office address is 53 State Street,
Boston, Massachusetts 02109, being at least 18 years of age, hereby forms a
corporation under the general corporation laws of the State of Maryland.
ARTICLE II
NAME
----
The name of the corporation (the "Corporation") is:
"Maryland Property Capital Trust, Inc."
ARTICLE III
PURPOSES
--------
Purpose and Powers. The purposes for which the Corporation is formed are to
------------------
engage in business as a real estate investment trust (a "REIT") (as that phrase
is defined under Section 856 of the Internal Revenue Code of 1986, as amended
(the "Code")) and to engage in any other lawful act or activity for which
corporations may be organized under the Maryland General Corporation Law, as now
or hereafter in force (the "MGCL"). Without limiting the generality of the this
Article III, the purposes for which the Corporation is formed include
continuation of business heretofore conducted by Property Capital Trust, a
Massachusetts business trust being or to be merged into this Corporation. The
foregoing purposes shall be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of these
1
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Articles, as amended from time to time, and each shall be regarded as
independent. The foregoing purposes are also to be construed as powers of the
Corporation, and shall be in addition to and not in limitation of the general
powers of corporations under the laws of the State of Maryland.
ARTICLE IV
PRINCIPAL OFFICE ADDRESS
------------------------
The address of the principal office of the Corporation in Maryland is c/o
The Corporation Trust, Inc., 32 South Street, Baltimore, Maryland 21202.
ARTICLE V
THE RESIDENT AGENT
------------------
The resident agent of the Corporation in Maryland is The Corporation Trust,
Inc., whose address is 32 South Street, Baltimore, Maryland 21202.
ARTICLE VI
BOARD OF DIRECTORS
------------------
6.1 General Powers; Action by Committee. The business and affairs of the
-----------------------------------
Corporation shall be managed under the direction of the Board of Directors and,
except as otherwise expressly provided by law, these Articles or the by-laws, as
amended from time to time (the "By-laws"), of the Corporation, all of the powers
of the Corporation shall be vested in such Board. Any action which the Board of
Directors is empowered to take may be taken on behalf of the Board of Directors
by a duly authorized committee thereof except (i) to the extent limited by
Maryland law, these Articles or the By-laws and (ii) for any action which
requires the affirmative vote or approval of a majority of all Directors then in
office (unless, in such case, these Articles or the By-laws specifically provide
that a duly authorized committee can take such action on behalf of the Board of
Directors). A majority of the Board of Directors shall constitute a quorum and,
except as otherwise specifically provided in these Articles, the affirmative
vote of a majority of the Directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors.
6.2 Number; Classes. The number of Directors of the Corporation shall
---------------
initially be 3, which number may thereafter by increased or decreased from time
to time by a resolution duly adopted by the Board of Directors; provided,
--------
however, that the total number of Directors shall be not fewer than the minimum
- -------
number required by the MGCL. The Board of Directors shall be divided into 3
classes (Class I, Class II and Class III), the number of Directors of each class
being as nearly equal as practical, with the term of office of one class
expiring each year. No reduction in the number of Directors shall cause the
removal of any Director from office prior to the expiration of his or her term.
Immediately following the effectiveness of these Articles of Incorporation, the
Directors of the Corporation shall be as follows:
Class I Class II Class III
------- -------- ---------
Bruce A. Beal Robert A. Beal Michael A. Manzo
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6.3 Term; Election. The respective terms of the Directors shall continue
--------------
until the annual meeting of stockholders held in 1999 in the case of Class I
Directors, in 2000 in the case of Class II Directors and in 2001 in the case of
Class III Directors. The Directors elected at each annual meeting of
stockholders shall hold office until their successors are duly elected and
qualified or until their earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article VII of these Articles, the holders of any one or more series of Stock
shall have the right, voting separately as a series or together with holders of
other such series, to elect Directors at an annual or special meeting of
stockholders, the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the terms of these Articles
and any articles supplementary applicable thereto.
During any period when the holders of any series of Stock have the right to
elect additional Directors as provided for or fixed pursuant to the provisions
of Article VII of these Articles, then upon commencement and for the duration of
the period during which such right continues: (a) the then otherwise total
authorized number of Directors of the Corporation shall automatically be
increased by such specified number of Directors, and the holders of such Stock
shall be entitled to elect the additional Directors so provided for or fixed
pursuant to said provisions and (b) each such additional Director shall serve
until such Director's successor shall have been duly elected and qualified, or
until such Director's right to hold such office terminates pursuant to said
provisions, whichever occurs earlier, subject to such Director's earlier death,
disqualification, resignation or removal. Except as otherwise provided by the
Board of Directors in the resolution or resolutions establishing such series,
whenever the holders of any series of Stock having such right to elect
additional Directors are divested of such right pursuant to the provisions of
such Stock, the terms of office of all such additional Directors elected by the
holders of such Stock, or elected to fill any vacancies resulting from the
death, resignation, disqualification or removal of such additional Directors,
shall forthwith terminate and the total authorized number of Directors of the
Corporation shall be reduced accordingly.
6.4 Resignation or Removal of Directors. Any Director may resign from the
-----------------------------------
Board of Directors or any committee thereof at any time by written notice to the
Board of Directors, effective upon execution and delivery to the Corporation of
such notice or upon any future date specified in the notice. Subject to the
rights, if any, of the holders of any series of Stock to elect Directors and to
remove any Director whom such holders have the right to elect, any Director
(including persons elected by Directors to fill vacancies in the Board of
Directors) may be removed from office (a) only with cause and (b) only by the
affirmative vote of the holders of at least a majority of the shares then
entitled to vote at a meeting of the stockholders called for that purpose. For
purposes of these Articles, "cause," with respect to the removal of any
Director, shall mean only (i) conviction of a felony, (ii) declaration of
unsound mind by order of a court, (iii) gross dereliction of duty, (iv)
commission of any act involving moral turpitude or (v) commission of an act that
constitutes intentional misconduct or a knowing violation of law if such action
in either event results both in an improper substantial personal benefit to such
Director and a material injury to the Corporation.
6.5 Vacancies. Subject to the rights, if any, of the holders of any class
---------
or series of Stock to elect Directors and to fill vacancies on the Board of
Directors relating thereto, any vacancy on the Board of Directors which results
from the removal of a Director for cause shall be filled by the affirmative vote
of a majority of votes cast by the stockholders normally entitled to vote in the
election of Directors at a meeting of stockholders. Any vacancy occurring on the
Board of Directors for any other reason, except as a result of an increase in
the number of Directors, may be filled by a majority vote of the remaining
Directors, notwithstanding that such majority is less than a quorum. Any vacancy
occurring on the Board of Directors as a result of an increase in the number of
Directors may be filled by a majority vote of the entire Board of Directors. A
Director elected by the Board of Directors or the stockholders to fill a vacancy
shall hold
3
<PAGE>
office until the annual meeting of stockholders at which Directors of the
applicable Class of Directors will be elected and until his or her successor is
elected and qualified. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until such vacancy is filled.
6.6 Powers. Subject to the express limitations herein or in the By-laws,
------
the business and affairs of the Corporation shall be managed under the direction
of the Board of Directors. These Articles, as amended or supplemented from time
to time, shall be construed with a presumption in favor of the grant of power
and authority to the Directors. The determination as to any of the following
matters, made in good faith by or pursuant to the direction of the Board of
Directors consistent with these Articles and in the absence of actual receipt of
an improper benefit in money, property or services or active and deliberate
dishonesty established by a court, shall be final and conclusive and shall be
binding upon the Corporation and every holder of shares of its Stock: the amount
of the net income of the Corporation for any period and the amount of assets at
any time legally available for the payment of dividends, redemption of its Stock
or the payment of other distributions on its Stock; the amount of paid-in
surplus, net assets, other surplus, annual or other net profit, net assets in
excess of capital, undivided profits or excess of profits over losses on sales
of assets; the amount, purpose, time of creation, increase or decrease,
alteration or cancellation of any reserves or charges and the propriety thereof
(whether or not any obligation or liability for which such reserves or charges
shall have been created shall have been paid or discharged); the fair value, or
any sale, bid or asked price to be applied in determining the fair value, of any
asset owned or held by the Corporation; any matter relating to the acquisition,
holding and disposition of any assets by the Corporation; or any other matter
relating to the business and affairs of the Corporation.
ARTICLE VII
STOCK
-----
7.1 Authorized Stock. The total number of shares of Stock which the
----------------
Corporation has authority to issue is thirty million (30,000,000) shares,
initially consisting of (i) five million (5,000,000) shares of Preferred Stock,
par value $.01 per share; (ii) ten million (10,000,000) shares of Common Stock,
par value $.01 per share; and (iii) fifteen million (15,000,000) shares of
Excess Stock, par value $.01 per share. The aggregate par value of all the
shares of all classes of Stock is three hundred thousand dollars ($300,000). If
shares of one class of Stock are classified or reclassified into shares of
another class of Stock pursuant to this Article VII, the number of authorized
shares of the former class shall be automatically decreased and the number of
shares of the latter class shall be automatically increased, in each case by the
number of shares so classified or reclassified, so that the aggregate number of
shares of Stock of all classes that the Corporation has authority to issue shall
not be more than the total number of shares of Stock set forth in the first
sentence of this paragraph.
7.2 Preferred Stock. Subject to any limitations prescribed by law, the
---------------
Board of Directors is expressly authorized to classify any unissued shares of
Preferred Stock and reclassify any previously classified but unissued shares of
Preferred Stock of any series from time to time, in one or more classes or
series of such Stock and, by filing articles supplementary with the State
Department of Assessments and Taxation of Maryland, to establish or change from
time to time the number of shares to be included in each such class or series,
and to fix the preferences, conversion or other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption of each class or series.
Any action by the Board of Directors under this Section 7.2 of Article VII shall
require the affirmative vote of a majority of the Directors then in office;
provided, however, that by the
- -------- -------
4
<PAGE>
affirmative vote of a majority of the Directors then in office, the Board of
Directors may appoint a committee to act on behalf of the Board of Directors
under this Section 7.2, and in such event the affirmative vote of a majority of
the members of such committee then in office shall be required for any action
under this Section 7.2.
7.3 Common Stock. Except as provided by law or in this Article VII (or in
-------------
any articles supplementary regarding any class or series of Preferred Stock):
7.3.1 Voting Rights. The holders of shares of Common Stock shall be
-------------
entitled to vote for the election of Directors and on all other matters
requiring stockholder action, and each holder of shares of Common Stock
shall be entitled to one vote for each share of Common Stock held by such
stockholder.
7.3.2 Dividend Rights. Holders of Common Stock shall be entitled to
---------------
receive such dividends and other distributions in cash, Stock or property of
the Corporation as may be authorized and declared by the Board of Directors
upon the Common Stock and, if any Excess Stock resulting from the
conversion of Common Stock is then outstanding, such Excess Stock out of any
assets or funds of the Corporation legally available therefor, but only when
and as authorized by the Board of Directors or any authorized committee
thereof from time to time, and shall share ratably with the holders of such
Excess Stock resulting from the conversion of Common Stock in any such
dividend or distribution.
Before payment of any dividends or other distributions, there may be
set aside out of any assets of the Corporation available for dividends or
other distributions such sum or sums as the Board of Directors may from to
time, in its absolute discretion, think proper as a reserve fund for
contingencies, for equalizing dividends or other distributions, for
repairing or maintaining any property of the Corporation or for such other
purpose as the Board of Directors shall determine to be in the best interest
of the Corporation, and the Board of Directors may modify or abolish any
such reserve in the manner in which it was created.
7.3.3 Rights Upon Liquidation. Upon the voluntary or involuntary
-----------------------
liquidation, dissolution or winding up of the Corporation, subject to the
rights of holders of any shares of Preferred Stock and Excess Stock
resulting from the conversion of Preferred Stock, the net assets of the
Corporation available for distribution to the holders of Common Stock, and,
if any Excess Stock resulting from the conversion of Common Stock is then
outstanding, such Excess Stock, shall be distributed pro rata to such
holders in proportion to the number of shares of Common Stock and such
Excess Stock held by each.
7.4 Excess Stock. For the purposes of this Section 7.4, terms not
------------
otherwise defined shall have the meanings set forth in Article IX.
7.4.1 Conversion into Excess Stock.
----------------------------
(a) If, notwithstanding the other provisions contained in these
Articles, prior to the Restriction Termination Date, there is a
purported Transfer or Non-Transfer Event such that any Person (other
than a Look-Through Entity) would Beneficially Own shares of Equity
Stock in excess of the Ownership Limit, or such that any Person that
is a Look-Through Entity would Beneficially Own shares of Equity Stock
in excess of the Look-Through Limit, then, (i) except as otherwise
provided in Section 9.4 of Article IX, the purported transferee shall
be
5
<PAGE>
deemed to be a Prohibited Owner and shall acquire no right or interest
(or, in the case of a Non-Transfer Event, the Person holding record
title to the shares of Equity Stock Beneficially Owned by such
Beneficial Owner shall cease to own any right or interest) in such
number of shares of Equity Stock which would cause such Beneficial
Owner to Beneficially Own shares of Equity Stock in excess of the
Ownership Limit or the Look-Through Limit, as the case may be, (ii)
such number of shares of Equity Stock in excess of the Ownership Limit
or the Look-Through Limit, as the case may be (rounded up to the
nearest whole share), shall be automatically converted into an equal
number of shares of Excess Stock and transferred to a Trust in
accordance with Section 7.4.4 of this Article VII and (iii) the
Prohibited Owner shall submit the certificates representing such
number of shares of Equity Stock to the Corporation, accompanied by
all requisite and duly executed assignments of transfer thereof, for
registration in the name of the Trustee of the Trust. If the shares of
Equity Stock that are converted into Excess Stock are not shares of
Common Stock, then the Excess Stock into which they are converted
shall be deemed to be a separate series of Excess Stock with a
designation and title corresponding to the designation and title of
the shares that have been converted into the Excess Stock. Such
conversion into Excess Stock and transfer to a Trust shall be
effective as of the close of trading on the Trading Day prior to the
date of the purported Transfer or Non-Transfer Event, as the case may
be, even though the certificates representing the shares of Equity
Stock so converted may be submitted to the Corporation at a later
date.
(b) If, notwithstanding the other provisions contained in these
Articles, prior to the Restriction Termination Date there is a
purported Transfer or Non-Transfer Event that, if effective, would (i)
result in the Corporation being "closely held" within the meaning of
Section 856(h) of the Code, (ii) cause the Corporation to
Constructively Own 10% or more of the ownership interest in a tenant
of the Corporation's or a Subsidiary's real property within the
meaning of Section 856(d)(2)(B) of the Code or (iii) result in the
shares of Equity Stock being beneficially owned by fewer than 100
persons within the meaning of Section 856(a)(5) of the Code, then (x)
the purported transferee shall be deemed to be a Prohibited Owner and
shall acquire no right or interest (or, in the case of a Non-Transfer
Event, the Person holding record title of the shares of Equity Stock
with respect to which such Non-Transfer Event occurred shall cease to
own any right or interest) in such number of shares of Equity Stock,
the ownership of which by such purported transferee or record holder
would (A) result in the Corporation being "closely held" within the
meaning of Section 856(h) of the Code, (B) cause the Corporation to
Constructively Own 10% or more of the ownership interests in a tenant
of the Corporation's or a Subsidiary's real property within the
meaning of Section 856(d)(2)(B) of the Code or (C) result in the
shares of Equity Stock being beneficially owned by fewer than 100
persons within the meaning of Section 856(a)(5) of the Code, (y) such
number of shares of Equity Stock (rounded up to the nearest whole
share) shall be automatically converted into an equal number of shares
of Excess Stock and transferred to a Trust in accordance with Section
7.4.4 of this Article VII and (z) the Prohibited Owner shall submit
such number of shares of Equity Stock to the Corporation, accompanied
by all requisite and duly executed assignments of transfer thereof,
for registration in the name of the Trustee of the Trust. If the
shares of Equity Stock that are converted into Excess Stock are not
shares of Common Stock, then the Excess Stock into which they are
converted shall be deemed to be a separate series of Excess Stock with
a designation and title corresponding to the designation and title of
the shares that have been converted into the Excess Stock. Such
conversion into Excess Stock and transfer to a Trust shall be
effective as of the close of trading on the Trading Day prior to the
date of the purported Transfer or Non-Transfer Event, as the case may
be, even though the certificates representing the shares of Equity
Stock so converted may be submitted to the Corporation at a
6
<PAGE>
later date.
(c) Upon the occurrence of such a conversion of shares of
Equity Stock into an equal number of shares of Excess Stock, such
shares of Equity Stock shall be automatically retired and canceled,
without any action required by the Board of Directors of the
Corporation, and shall thereupon be restored to the status of
authorized but unissued shares of the particular class or series of
Equity Stock from which such Excess Stock was converted and may be
reissued by the Corporation as that particular class or series of
Equity Stock.
7.4.2 Remedies for Breach. If the Corporation, or its designees,
-------------------
shall at any time determine in good faith that a Transfer has taken place in
violation of Section 9.2 of Article IX or that a Person intends to acquire or
has attempted to acquire Beneficial Ownership or Constructive Ownership of any
shares of Equity Stock in violation of Section 9.2 of Article IX, the
Corporation shall take such action as it deems advisable to refuse to give
effect to or to prevent such Transfer or acquisition, including, but not limited
to, refusing to give effect to such Transfer on the stock transfer books of the
Corporation or instituting proceedings to enjoin such Transfer or acquisition,
but the failure to take any such action shall not affect the automatic
conversion of shares of Equity Stock into Excess Stock and their transfer to a
Trust in accordance with Section 7.4.4.
7.4.3 Notice of Restricted Transfer. Any Person who acquires or
-----------------------------
attempts to acquire shares of Equity Stock in violation of Section 9.2 of
Article IX, or any Person who owns shares of Equity Stock that were converted
into shares of Excess Stock and transferred to a Trust pursuant to Sections
7.4.1 and 7.4.4 of this Article VII, shall immediately give written notice to
the Corporation of such event and shall provide to the Corporation such other
information as the Corporation may request in order to determine the effect, if
any, of such Transfer or Non-Transfer Event, as the case may be, on the
Corporation's status as a REIT.
7.4.4 Ownership in Trust. Upon any purported Transfer or
------------------
Non-Transfer Event that results in Excess Stock pursuant to Section 7.4.1 of
this Article VII, (i) the Corporation shall create, or cause to be created, a
Trust, and shall designate a Trustee and name a Beneficiary thereof and (ii)
such Excess Stock shall be automatically transferred to such Trust to be held
for the exclusive benefit of the Beneficiary. Any conversion of shares of Equity
Stock into shares of Excess Stock and transfer to a Trust shall be effective as
of the close of trading on the Trading Day prior to the date of the purported
Transfer or Non-Transfer Event that results in the conversion. Shares of Excess
Stock so held in trust shall remain issued and outstanding shares of Stock of
the Corporation.
7.4.5 Dividend Rights. Each share of Excess Stock shall be
---------------
entitled to the same dividends and distributions (as to both timing and amount)
as may be authorized by the Board of Directors with respect to shares of the
same class and series as the shares of Equity Stock that were converted into
such Excess Stock. The Trustee, as record holder of the shares of Excess Stock,
shall be entitled to receive all dividends and distributions and shall hold all
such dividends or distributions in trust for the benefit of the Beneficiary. The
Prohibited Owner with respect to such shares of Excess Stock shall repay to the
Trust the amount of any dividends or distributions received by it that are (i)
attributable to any shares of Equity Stock that have been converted into shares
of Excess Stock and (ii) dividends or distributions which were distributed by
the Corporation to stockholders of record on a record date which was on or after
the date that such shares were converted into shares of Excess Stock. The
Corporation shall take all measures that it determines reasonably necessary to
recover the amount of any such dividend or distribution paid to a Prohibited
Owner, including, if necessary, withholding any portion of future dividends or
distributions payable on shares of Equity Stock Beneficially Owned
7
<PAGE>
by the Person who, but for the provisions of Articles VII and IX, would
Constructively Own or Beneficially Own the shares of Equity Stock that were
converted into shares of Excess Stock; and, as soon as reasonably
practicable following the Corporation's receipt or withholding thereof,
shall pay over to the Trust for the benefit of the Beneficiary the dividends
so received or withheld, as the case may be.
7.4.6 Rights upon Liquidation. In the event of any voluntary or
-----------------------
involuntary liquidation of, or winding up of, or any distribution of the
assets of, the Corporation, each holder of shares of Excess Stock shall be
entitled to receive, ratably with each other holder of shares of Equity
Stock of the same class and series as the shares which were converted into
such Excess Stock and other holders of such Excess Stock, that portion of
the assets of the Corporation that is available for distribution to the
holders of shares of such class and series of Equity Stock and such Excess
Stock. The Trust shall distribute to the Prohibited Owner the amounts
received upon such liquidation, dissolution, or winding up, or distribution;
provided, however, that the Prohibited Owner shall not be entitled to
-------- -------
receive amounts in excess of, in the case of a purported Transfer in which
the Prohibited Owner gave value for shares of Equity Stock and which
Transfer resulted in the conversion of the shares into shares of Excess
Stock, the product of (x) the price per share, if any, such Prohibited Owner
paid for the shares of Equity Stock and (y) the number of shares of Equity
Stock which were so converted into Excess Stock, and, in the case of a Non-
Transfer Event or purported Transfer in which the Prohibited Owner did not
give value for such shares (e.g., if the shares were received through a gift
or devise) and which Non-Transfer Event or purported Transfer, as the case
may be, resulted in the conversion of the shares into shares of Excess
Stock, the product of (x) the price per share equal to the Market Price on
the date of such Non-Transfer Event or purported Transfer and (y) the number
of shares of Equity Stock which were so converted into Excess Stock. Any
remaining amount in such Trust shall be distributed to the Beneficiary.
7.4.7 Voting Rights. Each share of Excess Stock shall entitle the
-------------
holder to no voting rights other than those voting rights which must
accompany a class of Stock under Maryland law. The Trustee, as record
holder of the Excess Stock, shall be entitled to vote all shares of Excess
Stock in the event voting rights are mandated by Maryland law. Any vote by
a Prohibited Owner as a purported holder of shares of Equity Stock prior to
the discovery by the Corporation that such shares of Equity Stock have been
converted into shares of Excess Stock shall, subject to applicable law, (i)
be rescinded and shall be void ab initio with respect to such shares of
-- ------
Excess Stock and (ii) be recast in accordance with the desires of the
Trustee acting for the benefit of the Beneficiary; provided, however, that
-------- -------
if the Corporation has already taken irreversible corporate action, then the
Trustee shall not have the authority to rescind and recast such vote.
7.4.8 Designation of Permitted Transferee.
-----------------------------------
(a) As soon as practicable after the Trustee acquires Excess Stock,
but in an orderly fashion so as not to materially adversely affect the trading
price of Common Stock, the Trustee shall designate one or more Persons as
Permitted Transferees and sell to such Permitted Transferees any shares of
Excess Stock held by the Trustee; provided, however, that (i) any Permitted
-------- -------
Transferee so designated purchases for valuable consideration (whether in a
public or private sale) the shares of Excess Stock and (ii) any Permitted
Transferee so designated may acquire such shares of Excess Stock without
violating any of the restrictions set forth in Section 9.2 of Article IX and
without such acquisition resulting in the conversion of the shares of Equity
Stock so acquired into shares of Excess Stock and the transfer of such shares to
a Trust pursuant to Sections 7.4.1 and 7.4.4 of this Article VII. The Trustee
shall have the exclusive and absolute right to designate Permitted Transferees
of any and all shares of Excess Stock. Prior to any transfer by the Trustee
8
<PAGE>
of shares of Excess Stock to a Permitted Transferee, the Trustee shall give not
less than five Trading Days' prior written notice to the Corporation of such
intended transfer and the Corporation must have waived in writing its purchase
rights, if any, under Section 7.4.10 of this Article VII.
(b) Subject to Section 7.4.8, upon the designation by the Trustee of
a Permitted Transferee in accordance with the provisions of this Section 7.4.8,
the Trustee shall cause to be transferred to the Permitted Transferee shares of
Excess Stock acquired by the Trustee pursuant to Section 7.4.4 of this Article
VII. Upon such transfer of shares of Excess Stock to the Permitted Transferee,
such shares of Excess Stock shall be automatically converted into an equal
number of shares of Equity Stock of the same class and series which was
converted into such Excess Stock. Upon the occurrence of such a conversion of
shares of Excess Stock into an equal number of shares of Equity Stock, such
shares of Excess Stock shall be automatically retired and canceled, without any
action required by the Board of Directors of the Corporation, and shall
thereupon be restored to the status of authorized but unissued shares of Excess
Stock and may be reissued by the Corporation as Excess Stock. The Trustee shall
(i) cause to be recorded on the stock transfer books of the Corporation that the
Permitted Transferee is the holder of record of such number of shares of Equity
Stock, and (ii) distribute to the Beneficiary any and all amounts held with
respect to such shares of Excess Stock after making payment to the Prohibited
Owner pursuant to Section 7.4.9 of this Article VII.
(c) If the Transfer of shares of Excess Stock to a purported
Permitted Transferee would or does violate any of the transfer restrictions set
forth in Section 9.2 of Article IX, such Transfer shall be void ab initio as to
-- ------
that number of shares of Excess Stock that cause the violation of any such
restriction when such shares are converted into shares of Equity Stock (as
described in clause (b) above) and the purported Permitted Transferee shall be
deemed to be a Prohibited Owner and shall acquire no rights in such shares of
Excess Stock or Equity Stock. Such shares of Equity Stock shall be automatically
re-converted into Excess Stock and transferred to the Trust from which they were
originally Transferred. Such conversion and transfer to the Trust shall be
effective as of the close of trading on the Trading Day prior to the date of the
Transfer to the purported Permitted Transferee and the provisions of this
Article VII shall apply to such shares, including, without limitation, the
provisions of Sections 7.4.8 through 7.4.10 with respect to any future Transfer
of such shares by the Trust.
7.4.9 Compensation to Record Holder of Shares of Equity Stock That Are
----------------------------------------------------------------
Converted into Shares of Excess Stock. Any Prohibited Owner shall be
-------------------------------------
entitled (following acquisition of the shares of Excess Stock and subsequent
designation of and sale of Excess Stock to a Permitted Transferee in
accordance with Section 7.4.8 of this Article VII or following the purchase
of such shares in accordance with Section 7.4.10 of this Article VII) to
receive from the Trustee following the sale or other disposition of such
shares of Excess Stock the lesser of (i) (a) in the case of a purported
Transfer in which the Prohibited Owner gave value for shares of Equity Stock
and which Transfer resulted in the conversion of such shares into shares of
Excess Stock, the product of (x) the price per share, if any, such
Prohibited Owner paid for the shares of Equity Stock and (y) the number of
shares of Equity Stock which were so converted into Excess Stock and (b) in
the case of a Non-Transfer Event or purported Transfer in which the
Prohibited Owner did not give value for such shares (e.g., if the shares
were received through a gift or devise) and which Non-Transfer Event or
purported Transfer, as the case may be, resulted in the conversion of such
shares into shares of Excess Stock, the product of (x) the price per share
equal to the Market Price on the date of such Non-Transfer Event or
purported Transfer and (y) the number of shares of Equity Stock which were
so converted into Excess Stock or (ii) the proceeds received by the Trustee
from the sale or other disposition of such shares of Excess Stock in
accordance with Section 7.4.8 or Section 7.4.10 of this Article VII. Any
amounts received by the Trustee in respect of such shares of Excess Stock
and in excess of such
9
<PAGE>
amounts to be paid to the Prohibited Owner pursuant to this Section 7.4.9
shall be distributed to the Beneficiary in accordance with the provisions of
Section 7.4.8 of this Article VII. Each Beneficiary and Prohibited Owner
shall be deemed to have waived any and all claims that it may have against
the Trustee and the Trust arising out of the disposition of shares of Excess
Stock, except for claims arising out of the gross negligence or willful
misconduct of, or any failure to make payments in accordance with this
Section 7.4 of this Article VII, by such Trustee.
7.4.10 Purchase Right in Excess Stock. Shares of Excess Stock shall
------------------------------
be deemed to have been offered for sale to the Corporation or its designee,
at a price per share equal to the lesser of (i) the price per share in the
transaction that created such shares of Excess Stock (or, in the case of a
Non-Transfer Event or Transfer in which the Prohibited Owner did not give
value for the shares (e.g., if the shares were received through a gift or
devise), the Market Price on the date of such Non-Transfer Event or Transfer
in which the Prohibited Owner did not give value for the shares) or (ii) the
Market Price on the date the Corporation, or its designee, accepts such
offer. The Corporation shall have the right to accept such offer for a
period of 90 days following the later of (a) the date of the Non-Transfer
Event or purported Transfer which results in such shares of Excess Stock or
(b) the date the Board of Directors first determines that a Transfer or Non-
Transfer Event resulting in shares of Excess Stock has occurred, if the
Corporation does not receive a notice of such Transfer or Non-Transfer Event
pursuant to Section 7.4.3 of this Article VII.
7.5 Classification of Stock. The Board of Directors may classify or
-----------------------
reclassify any unissued shares of Stock from time to time by setting or changing
the preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications, and terms
and conditions of redemption for each class or series, including, but not
limited to, the reclassification of unissued shares of Common Stock to shares of
Preferred Stock or unissued shares of Preferred Stock to shares of Common Stock
or the issuance of any rights plan or similar plan.
7.6 Issuance of Stock. The Board of Directors may authorize the issuance
-----------------
from time to time of shares of Stock of any class or series, whether now or
hereafter authorized, or securities or rights convertible into shares of Stock,
for such consideration as the Board of Directors may deem advisable (or without
consideration in the case of a share split or dividend), subject to such
restrictions or limitations, if any, as may be set forth in these Articles or
the By-laws of the Corporation.
7.7 Dividends or Distributions. The Directors may from time to time
--------------------------
authorize and declare and pay to stockholders such dividends or distributions in
cash, property or other assets of the Corporation or in securities of the
Corporation or from any other source as the Directors in their discretion shall
determine.
7.8 Ambiguity. In the case of an ambiguity in the application of any of
---------
the provisions of this Article VII, the Board of Directors shall have the power
to determine the application of the provisions of this Article VII with respect
to any situation based on the facts known to it.
7.9 Legend. Except as otherwise determined by the Board of Directors,
------
each certificate for shares of Equity Stock shall bear substantially the
following legend:
"The shares of Property Capital Trust, Inc. (the
"Corporation") represented by this certificate are subject
to restrictions set forth in the Corporation's charter, as
the same may be amended from time to time, which prohibit in
general (a) any Person (other than a Look-Through Entity)
from Beneficially Owning shares of Equity Stock in excess of
the Ownership Limit, (b) any Look-Through Entity
10
<PAGE>
from Beneficially Owning shares of Equity Stock in excess of
the Look-Through Ownership Limit and (c) any Person from
acquiring or maintaining any ownership interest in the stock
of the Corporation that is inconsistent with (i) the
requirements of the Internal Revenue Code of 1986, as
amended, pertaining to real estate investment trusts or (ii)
the charter of the Corporation, and the holder of this
certificate by his, her or its acceptance hereof consents to
be bound by such restrictions. Capitalized terms used in
this paragraph and not defined herein are defined in the
Corporation's charter, as the same may be amended from time
to time.
The Corporation will furnish without charge, to each
stockholder who so requests, a copy of the relevant
provisions of the charter and the by-laws, each as amended,
of the Corporation, a copy of the provisions setting forth
the designations, preferences, privileges and rights of each
class of stock or series thereof that the Corporation is
authorized to issue and the qualifications, limitations and
restrictions of such preferences and/or rights. Any such
request may be addressed to the Secretary of the Corporation
or to the transfer agent named on the face hereof."
7.10 Severability. Each provision of this Article VII shall be severable
------------
and an adverse determination as to any such provision shall in no way affect the
validity of any other provision.
7.11 Articles and By-laws. All persons who shall acquire Stock in the
--------------------
Corporation shall acquire the same subject to the provisions of these Articles
and the By-laws.
ARTICLE VIII
LIMITATION ON PREEMPTIVE RIGHTS
-------------------------------
No holder of any Stock or any other securities of the Corporation, whether
now or hereafter authorized, shall have any preferential or preemptive rights to
subscribe for or purchase any Stock or any other securities of the Corporation
other than such rights, if any, as the Board of Directors, in its sole
discretion, may fix by articles supplementary, by contract or otherwise; and any
Stock or other securities which the Board of Directors may determine to offer
for subscription may, within the Board of Directors' sole discretion, be offered
to the holders of any class, series or type of Stock or other securities at the
time outstanding to the exclusion of holders of any or all other classes, series
or types of Stock or other securities at the time outstanding.
ARTICLE IX
LIMITATIONS ON TRANSFER AND OWNERSHIP OF EQUITY STOCK
-----------------------------------------------------
9.1 Definitions. For purposes of this Article IX, the following terms
-----------
shall have the meanings set forth below:
"Beneficial Ownership," when used with respect to ownership of shares
--------------------
of Equity Stock by any Person, shall mean all shares of Equity Stock which are
(i) directly owned by such Person, (ii) indirectly owned by such Person (if such
Person is an "individual" as defined in Section 542(a)(2) of the Code) taking
into account the constructive ownership rules of Section 544 of the Code, as
modified by
11
<PAGE>
Section 856(h)(1)(B) of the Code, or (iii) beneficially owned by such Person
pursuant to Rule 13d-3 under the Exchange Act of 1934; provided, however, that
-------- -------
in determining the number of shares Beneficially Owned by a Person or group, no
share shall be counted more than once although applicable to two or more of
clauses (i), (ii) and (iii) of this definition or (in the case of a group)
although Beneficially Owned by more than one Person in such group. (If a Person
Beneficially Owns shares of Equity Stock that are not actually outstanding
(e.g., shares issuable upon the exercise of an option or convertible security)
("Option Shares"), then, whenever these Articles require a determination of the
percentage of outstanding shares of a class of Equity Stock Beneficially Owned
by that Person, the Option Shares Beneficially Owned by that Person shall also
be deemed to be outstanding.)
"Beneficiary" shall mean, with respect to any Trust, one or more
-----------
organizations described in each of Section 170(b)(1)(A) (other than clauses
(vii) and (viii) thereof) and Section 170(c)(2) of the Code that are named by
the Corporation as the beneficiary or beneficiaries of such Trust, in accordance
with the provisions of Section 7.4.4 of Article VII.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Constructive Ownership" shall mean ownership of shares of Equity
----------------------
Stock by a Person who is or would be treated as a direct or indirect owner of
such shares of Equity Stock through the application of Section 318 of the Code,
as modified by Section 856(d)(5) of the Code. The terms "Constructive Owner,"
------------------
"Constructively Owns" and "Constructively Owned" shall have correlative
------------------- --------------------
meanings.
"Equity Stock" shall mean a particular class (other than Excess Stock)
------------
or series of stock of the Corporation. The use of the term "Equity Stock" or
any term defined by reference to the term "Equity Stock" shall refer to the
particular class or series of stock which is appropriate under the context.
"Look-Through Entity" shall mean a Person that is either (i) a trust
-------------------
described in Section 401(a) of the Code and exempt from tax under Section 501(a)
of the Code as modified by Section 856(h)(3) of the Code or (ii) registered
under the Investment Company Act of 1940.
"Look-Through Ownership Limit" shall mean, with respect to a class or
----------------------------
series of Equity Stock, 15% of the number of outstanding shares of such Equity
Stock.
"Market Price" of Equity Stock on any date shall mean the average of
------------
the Closing Price for shares of such Equity Stock for the five consecutive
Trading Days ending on such date. The "Closing Price" on any date shall mean (A)
-------------
where there exists a public market for the Corporation's Equity Stock, the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the American Stock Exchange or,
if the shares of Equity Stock are not listed or admitted to trading on the
American Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to securities listed on the principal national
securities exchange on which the shares of Equity Stock are listed or admitted
to trading or, if the shares of Equity Stock are not listed or admitted to
trading on any national securities exchange, the last quoted price, or if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by the Nasdaq Stock Market, Inc. or, if such system is no
longer in use, the principal other automated quotation system that may then be
in use or (B) if no public market for the Equity Stock exists, the Closing Price
will be determined by a single, independent appraiser selected by a committee
composed of Directors who are not officers or employees of the Corporation or
any affiliate thereof which appraiser shall appraise the Market Price for such
Equity Stock within such guidelines as shall
12
<PAGE>
be determined by such committee.
"Non-Transfer Event" shall mean an event other than a purported
------------------
Transfer that would cause (a) any Person (other than a Look-Through Entity) to
Beneficially Own shares of Equity Stock in excess of the Ownership Limit or (b)
any Look-Through Entity to Beneficially Own shares of Equity Stock in excess of
the Look-Through Ownership Limit. Non-Transfer Events include but are not
limited to (i) the granting of any option or entering into any agreement for the
sale, transfer or other disposition of shares (or of Beneficial Ownership of
shares) of Equity Stock or (ii) the sale, transfer, assignment or other
disposition of interests in any Person or of any securities or rights
convertible into or exchangeable for shares of Equity Stock or for interests in
any Person that results in changes in Beneficial Ownership of shares of Equity
Stock.
"Ownership Limit" shall mean, with respect to a class or series of
---------------
Equity Stock, ____% of the number of outstanding shares of such Equity Stock.
"Permitted Transferee" shall mean any Person designated as a Permitted
--------------------
Transferee in accordance with the provisions of Section 7.4.8 of Article VII.
"Person" shall mean (a) an individual or any corporation, partnership,
------
estate, trust, association, private foundation, joint stock company or any other
entity and (b) a "group" as that term is used for purposes of Section 13(d)(3)
of the Exchange Act; but shall not include an underwriter that participates in a
public offering of Equity Stock for a period of 90 days following purchase by
such underwriter of such Equity Stock.
"Prohibited Owner" shall mean, with respect to any purported Transfer
----------------
or Non-Transfer Event, any Person who is prevented from becoming or remaining
the owner of record title to shares of Equity Stock by the provisions of Section
7.4.1 of Article VII.
"Restriction Termination Date" shall mean the first day on which the
----------------------------
Board of Directors, in accordance with Article VI hereof, determines that it is
no longer in the best interests of the Corporation to attempt to, or continue
to, qualify under the Code as a REIT.
"Trading Day" shall mean a day on which the principal national
-----------
securities exchange on which any of the shares of Equity Stock are listed or
admitted to trading is open for the transaction of business or, if none of the
shares of Equity Stock are listed or admitted to trading on any national
securities exchange, any day other than a Saturday, a Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by law
or executive order to close.
"Transfer" (as a noun) shall mean any sale, transfer, gift,
--------
assignment, devise or other disposition of shares (or of Beneficial Ownership of
shares) of Equity Stock, whether voluntary or involuntary, whether of record,
constructively or beneficially and whether by operation of law or otherwise.
"Transfer" (as a verb) shall have the correlative meaning.
--------
"Trust" shall mean any separate trust created and administered in
-----
accordance with the terms of Section 7.4 of Article VII, for the exclusive
benefit of any Beneficiary.
"Trustee" shall mean any Person or entity, unaffiliated with both the
-------
Corporation and any Prohibited Owner (and, if different than the Prohibited
Owner, the Person who would have had Beneficial Ownership of the Shares that
would have been owned of record by the Prohibited Owner), designated by the
13
<PAGE>
Corporation to act as trustee of any Trust, or any successor trustee thereof.
9.2 Restriction on Ownership and Transfer.
-------------------------------------
(a) (I) Except as provided in Section 9.4 of this Article IX, until
the Restriction Termination Date, (i) no Person (other than a Look-Through
Entity) shall Beneficially Own shares of Equity Stock in excess of the Ownership
Limit and (ii) no Look-Through Entity shall Beneficially Own shares of Equity
Stock in excess of the Look-Through Ownership Limit.
(II) Except as provided in Section 9.4 of this Article IX, until the
Restriction Termination Date, any purported Transfer (whether or not the result
of a transaction entered into through the facilities of the American Stock
Exchange or any other national securities exchange or the Nasdaq Stock Market,
Inc. or any other automated quotation system) that, if effective, would result
in any Person (other than a Look-Through Entity) Beneficially Owning shares of
Equity Stock in excess of the Ownership Limit shall be void ab initio as to the
-- ------
Transfer of that number of shares of Equity Stock which would be otherwise
Beneficially Owned by such Person in excess of the Ownership Limit, and the
intended transferee shall acquire no rights in such shares of Equity Stock.
(III) Except as provided in Section 9.4 of this Article IX, until the
Restriction Termination Date, any purported Transfer (whether or not the result
of a transaction entered into through the facilities of the American Stock
Exchange or any other national securities exchange or the Nasdaq Stock Market,
Inc. or any other automated quotation system) that, if effective, would result
in any Look-Through Entity Beneficially Owning shares of Equity Stock in excess
of the Look-Through Ownership Limit shall be void ab initio as to the Transfer
-- ------
of that number of shares of Equity Stock which would be otherwise Beneficially
Owned by such Look-Through Ownership Entity in excess of the Look-Through
Ownership Limit, and the intended transferee Look-Through Entity shall acquire
no rights in such shares of Equity Stock.
(b) Until the Restriction Termination Date, any purported Transfer
(whether or not the result of a transaction entered into through the facilities
of the American Stock Exchange or any other national securities exchange or the
Nasdaq Stock Market, Inc. or any other automated quotation system) of shares of
Equity Stock that, if effective, would result in the Corporation being "closely
held" within the meaning of Section 856(h) of the Code shall be void ab initio
-- ------
as to the Transfer of that number of shares of Equity Stock that would cause the
Corporation to be "closely held" within the meaning of Section 856(h) of the
Code, and the intended transferee shall acquire no rights in such shares of
Equity Stock.
(c) Until the Restriction Termination Date, any purported Transfer
(whether or not the result of a transaction entered into through the facilities
of the American Stock Exchange or any other national securities exchange or the
Nasdaq Stock Market, Inc. or any other automated quotation system) of shares of
Equity Stock that, if effective, would cause the Corporation to Constructively
Own 10% or more of the ownership interests in a tenant of the real property of
the Corporation or any direct or indirect subsidiary (whether a corporation,
partnership, limited liability company or other entity) of the Corporation (a
"Subsidiary"), within the meaning of Section 856(d)(2)(B) of the Code, shall be
void ab initio as to the Transfer of that number of shares of Equity Stock that
-- ------
would cause the Corporation to Constructively Own 10% or more of the ownership
interests in a tenant of the real property of the Corporation or a Subsidiary
within the meaning of Section 856(d)(2)(B) of the Code, and the intended
transferee shall acquire no rights in such shares of Equity Stock.
(d) Until the Restriction Termination Date, any purported Transfer
(whether or not the result of a transaction entered into through the facilities
of the American Stock Exchange or any other
14
<PAGE>
national securities exchange or the Nasdaq Stock Market, Inc. or any other
automated quotation system) that, if effective, would result in shares of Equity
Stock being beneficially owned by fewer than 100 persons within the meaning of
Section 856(a)(5) of the Code shall be void ab initio and the intended
-- ------
transferee shall acquire no rights in such shares of Equity Stock.
9.3 Owners Required to Provide Information. Until the Restriction
--------------------------------------
Termination Date:
(a) Every Beneficial Owner of more than 5%, or such lower percentages as
are then required pursuant to regulations under the Code, of the outstanding
shares of any class or series of Equity Stock of the Corporation as of any
dividend record date on the Corporation's Equity Stock shall, within 30 days
after January 1 of each year, provide to the Corporation a written statement or
affidavit stating the name and address of such Beneficial Owner, the number of
shares of Equity Stock Beneficially Owned by such Beneficial Owner as of each
such dividend record date, and a description of how such shares are held. Each
such Beneficial Owner shall provide to the Corporation such additional
information as the Corporation may request in order to determine the effect, if
any, of such Beneficial Ownership on the Corporation's status as a REIT and to
ensure compliance with the Ownership Limit.
(b) Each Person who is a Beneficial Owner of shares of Equity Stock and
each Person (including the stockholder of record) who is holding shares of
Equity Stock for a Beneficial Owner shall provide to the Corporation a written
statement or affidavit stating such information as the Corporation may request
in order to determine the Corporation's status as a REIT and to ensure
compliance with the Ownership Limit.
9.4. Exception.
---------
(a) The Ownership Limit is hereby waived for the following persons:
Robert L. Beal
Bruce A. Beal
Molly Ann Special Limited Partner
Bruce A. Beal 1990 Trust
Robert L. Beal 1994 Revocable Trust
[OTHERS]
(b) The Board of Directors, upon receipt of a ruling from the Internal
Revenue Service or an opinion of counsel or other evidence or undertakings
acceptable to it, may, in its sole discretion, waive the application of the
Ownership Limit or the Look-Through Ownership Limit to a Person subject, as the
case may be, to any such limit, provided that (A) the Board of Directors obtains
such representations and undertakings from such Person as are reasonably
necessary to ascertain that such Person's Beneficial Ownership or Constructive
Ownership of shares of Equity Stock will now and in the future (i) not result in
the Corporation being "closely held" within the meaning of Section 856(h) of the
Code, (ii) not cause the Corporation to Constructively Own 10% or more of the
ownership interests of a tenant of the Corporation or a Subsidiary within the
meaning of Section 856(d)(2)(B) of the Code and to violate the 95% gross income
test of Section 856(c)(2) of the Code, and (iii) not result in the shares of
Equity Stock of the Corporation being beneficially owned by fewer than 100
persons within the meaning of Section 856(a)(5) of the Code, and (B) such Person
agrees in writing that any violation or attempted violation of (x) such other
limitation as the Board of Directors may establish at the time of such waiver
with respect to such Person or (y) such other restrictions and conditions as the
Board of Directors may in its sole discretion impose at the time of such waiver
with respect to such Person, will result, as of the time of such violation even
if discovered after
15
<PAGE>
such violation, in the conversion of such shares in excess of the original limit
applicable to such Person into shares of Excess Stock pursuant to Section 7.4.1
of Article VII.
9.5 American Stock Exchange Transactions. Notwithstanding any provision
------------------------------------
contained herein to the contrary, nothing in these Articles shall preclude the
settlement of any transaction entered into through the facilities of the
American Stock Exchange or any other national securities exchange or the Nasdaq
Stock Market, Inc. or any other automated quotation system. In no event shall
the existence or application of the preceding sentence have the effect of
deterring or preventing the conversion of Equity Stock into Excess Stock as
contemplated herein.
9.6 Ambiguity. In the case of an ambiguity in the application of any of the
---------
provisions of this Article IX, including any definition contained in Section 9.1
of this Article IX, the Board of Directors shall have the power to determine the
application of the provisions of this Article IX with respect to any situation
based on the facts known to it.
9.7 Remedies Not Limited. Except as set forth in Section 9.5 of this
--------------------
Article IX, nothing contained in this Article IX or Article VII shall limit the
authority of the Corporation to take such other action as it deems necessary or
advisable to protect the Corporation and the interests of its stockholders by
preservation of the Corporation's status as a REIT and to ensure compliance with
the Ownership Limit or the Look-Through Ownership Limit.
ARTICLE X
RIGHTS AND POWERS OF CORPORATION,
---------------------------------
BOARD OF DIRECTORS AND OFFICERS
-------------------------------
In carrying on its business, or for the purpose of attaining or furthering
any of its objects, the Corporation shall have all of the rights, powers and
privileges granted to corporations by the laws of the State of Maryland, as well
as the power to do any and all acts and things that a natural person or
partnership could do as now or hereafter authorized by law, either alone or in
partnership or conjunction with others. In furtherance and not in limitation of
the powers conferred by statute, the powers of the Corporation and of the
Directors and stockholders shall include the following:
10.1 Conflicts of Interest. Any Director or officer individually, or any
---------------------
firm of which any Director or officer may be a member, or any corporation or
association of which any Director or officer may be a director or officer or in
which any Director or officer may be interested as the holder of any amount of
its Stock or otherwise, may be a party to, or may be pecuniarily or otherwise
interested in, any contract or transaction of the Corporation, and, in the
absence of fraud, no contract or other transaction shall be thereby affected or
invalidated; provided, however, that (a) such fact shall have been disclosed or
-------- -------
shall have been known to the Board of Directors or the committee thereof that
approved such contract or transaction and such contract or transaction shall
have been approved or ratified by the affirmative vote of a majority of the
disinterested Directors, or (b) such fact shall have been disclosed or shall
have been known to the stockholders entitled to vote, and such contract or
transaction shall have been approved or ratified by a majority of the votes cast
by the stockholders entitled to vote, other than the votes of shares owned of
record or beneficially by the interested Director or corporation, firm or other
entity, or (c) the contract or transaction is fair and reasonable to the
Corporation. Any Director of the Corporation who is also a director or officer
of or interested in such other corporation or association, or who, or the firm
of which he is a member, is so interested, may be counted in determining the
existence of a quorum at any meeting of the Board of Directors of the
Corporation which shall authorize any such contract or transaction, with like
16
<PAGE>
force and effect as if he were not such director or officer of such other
corporation or association or were not so interested or were not a member of a
firm so interested.
10.2 Amendment of Articles. The Corporation reserves the right, from time
---------------------
to time, to make any amendment of its Articles, now or hereafter authorized by
law, including any amendment which alters the contract rights, as expressly set
forth in its Articles, of any outstanding Stock.
No amendment or repeal of these Articles shall be made unless the same is
first approved by the Board of Directors pursuant to a resolution adopted by the
Board of Directors in accordance with the MGCL, and, except as otherwise
provided by law, thereafter approved by the stockholders.
Whenever any vote of the holders of voting stock is required to amend or
repeal any provision of these Articles, then in addition to any other vote of
the holders of voting stock that is required by these Articles, the affirmative
vote of the holders of a majority of the outstanding shares of Stock of the
Corporation entitled to vote on such amendment or repeal, voting together as a
single class, and the affirmative vote of the holders of a majority of the
outstanding shares of each class entitled to vote thereon as a class, shall be
required to amend or repeal any provision of these Articles; provided, however,
-------- -------
that the affirmative vote of the holders of not less than two-thirds of the
outstanding shares entitled to vote on such amendment or repeal, voting together
as a single class, and the affirmative vote of the holders of not less than two-
thirds of the outstanding shares of each class entitled to vote thereon as a
class, shall be required to amend or repeal any of the provisions of Sections
6.4 or 6.5 of Article VI, Article X or Article XII of these Articles.
ARTICLE XI
INDEMNIFICATION
---------------
The Corporation (which for the purpose of this Article XI shall include
predecessor entities of the Corporation as set forth in Section 2-418 of the
MGCL) shall have the power to the maximum extent permitted by Maryland law in
effect from time to time, to obligate itself to indemnify, and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to, (a) any individual who is a present or former Director, trustee or officer
of the Corporation or (b) any individual who, while a Director of the
Corporation and at the request of the Corporation, serves or has served as a
director, officer, partner or trustee of another corporation, real estate
investment trust, partnership, joint venture, trust, employee benefit plan or
any other enterprise from and against any claim or liability to which such
person may become subject or which such person may incur by reason of his status
as a present or former Director or officer of the Corporation. The Corporation
shall provide such indemnification and advancement of expenses to a person who
served a predecessor of the Corporation in any of the capacities described in
(a) or (b) above and to any employee, or agent or shareholder (in connection
with the affairs of such entity) of the Corporation or a predecessor of the
Corporation.
ARTICLE XII
LIMITATION OF LIABILITY
-----------------------
To the fullest extent permitted under the MGCL as in effect on the date of
filing these Articles or as the MGCL is thereafter amended from time to time, no
Director or officer shall be liable to the Corporation
17
<PAGE>
or its stockholders for money damages. Neither the amendment or the repeal of
this Article, nor the adoption of any other provision in the Corporation's
Articles inconsistent with this Article, shall eliminate or reduce the
protection afforded by this Article to a Director or officer of the Corporation
with respect to any matter which occurred, or any cause of action, suit or claim
which but for this Article would have accrued or arisen, prior to such
amendment, repeal or adoption.
ARTICLE XIII
EXEMPTION FROM BUSINESS COMBINATION STATUTE
-------------------------------------------
Pursuant to Section 3-603(e)(1)(iii) of the MGCL, the Corporation expressly
elects not to be governed by the provisions of Section 3-602 of the MGCL with
respect to any business combination (as defined in Section 3-601 of the MGCL)
involving the Corporation.
ARTICLE XIV
EXEMPTION FROM CONTROL SHARE ACQUISITION STATUTE.
------------------------------------------------
The provisions of Title 3, Subtitle 7 of the MGCL shall not apply to any
share of Stock of the Corporation now or hereafter held by any current or future
Stockholders. All shares of Stock currently outstanding or issued in the future
are exempted from such provisions of the MGCL to the fullest extent permitted by
Maryland law.
ARTICLE XV
MISCELLANEOUS
-------------
13.1 Provisions in Conflict with Law or Regulations.
----------------------------------------------
(a) The provisions of these Articles are severable, and if the
Directors shall determine that any one or more of such provisions are in
conflict with the REIT provisions of the Code, or other applicable federal or
state laws, the conflicting provisions shall be deemed never to have constituted
a part of these Articles, even without any amendment of these Articles pursuant
to Section 10.2 hereof; provided, however, that such determination by the
-------- -------
Directors shall not affect or impair any of the remaining provisions of these
Articles or render invalid or improper any action taken or omitted prior to such
determination. No Director shall be liable for making or failing to make such a
determination.
(b) If any provision of these Articles or any application of such
provision shall be held invalid or unenforceable by any federal or state court
having jurisdiction, such holding shall not in any manner affect or render
invalid or unenforceable such provision in any other jurisdiction, and the
validity of the remaining provisions of these Articles shall not be affected.
Other applications of such provision shall be affected only to the extent
necessary to comply with the determination of such court.
THIRD: The amendment to and restatement of the Charter as hereinabove set
-----
forth as been duly advised by the Board of Directors and approved by the
stockholders of the Corporation as required by law.
18
<PAGE>
FOURTH: The current address of the principal office of the Corporation is as
------
set forth in Article IV of the foregoing amendment and restatement of the
charter.
FIFTH: The name and address of the Corporation's current resident agent is
-----
as set forth in Article V of the foregoing amendment and restatement of the
charter.
SIXTH: The number of directors of the Corporation and the names of those
-----
currently in office are as set forth in Article VI of the foregoing amendment
and restatement of the charter.
SEVENTH: The total number of shares of stock which the Corporation had
-------
authority to issue immediately prior to this amendment and restatement was one
hundred (100) shares of Common Stock, par value $.01 per share. The aggregate
par value of all shares of stock was one dollar ($1).
EIGHTH: The total number of shares of Stock which the Corporation has
------
authority to issue pursuant to the foregoing amendment and restatement of the
charter is thirty million (30,000,000) shares, consisting of (i) five million
(5,000,000) shares of Preferred Stock, par value $.01 per share; (ii) ten
million (10,000,000) shares of Common Stock, par value $.01 per share; and (iii)
fifteen million (15,000,000) shares of Excess Stock, par value $.01 per share.
The aggregate par value of all the shares of stock is three hundred thousand
dollars ($300,000).
NINTH: The undersigned President acknowledges these Articles of Amendment
-----
and Restatement to be the corporate act of the Corporation and as to all matters
or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
19
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IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment
and Restatement to be signed in its name and on its behalf by its President and
attested to by its Secretary on this _____ day of _______, 1999.
ATTEST: MARYLAND PROPERTY CAPITAL
TRUST, INC.
___________________________________ By:______________________________
Robert L. Beal, Corporate Secretary Bruce A. Beal, President
20
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EXHIBIT 3.2
FORM OF
BY-LAWS
OF
MARYLAND PROPERTY CAPITAL TRUST, INC.
ARTICLE I
---------
Definitions and Offices
-----------------------
1.1 Definitions For purposes of these By-laws, the following words shall
-----------
have the meanings set forth below:
(a) "Articles" shall mean the Articles of Incorporation of the
--------
Corporation, as amended from time to time.
(b) "Affiliate" of a Person shall mean (i) any Person that, directly or
---------
indirectly, controls or is controlled by or is under common control with such
other Person, (ii) any Person that owns, beneficially, directly or indirectly,
5% or more of the outstanding capital stock, shares or equity interests of such
other Person or (iii) any officer, director, employee, partner or trustee of
such other Person or any Person controlling, controlled by or under common
control with such Person (excluding directors and Persons serving in similar
capacities who are not otherwise Affiliates of such Person). For the purposes
of this definition, the term "Person" shall mean, and includes, any natural
person, corporation, partnership, association, trust, limited liability company
or any other legal entity. For the purposes of this definition, "control"
(including the correlative meanings of the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, through the ownership
of voting securities, partnership interests or other equity interests.
(c) "Corporation" shall mean Maryland Property Capital Trust, Inc.
-----------
(d) "Equity Stock" shall mean the common stock, par value $.01 per
------------
share, and the preferred stock, par value $.01 per share, of the Corporation.
(e) "Public Announcement" shall mean: (i) disclosure in a press release
-------------------
reported by the Dow Jones News Service, Associated Press or other similar
national news service, (ii) a report or other document filed publicly with the
Securities and Exchange Commission (including, without limitation, a Form 8-K)
or (iii) a letter or report sent to stockholders of record of the Corporation at
the time of the mailing of such letter or report.
(f) "MGCL" shall mean the Maryland General Corporation Law, as amended
----
from time to time.
1.2 Principal Office. The principal office of the Corporation shall be
----------------
located at such place or places as the Board of Directors may designate.
1.3 Additional Offices. The Corporation may have additional offices at such
------------------
places as the Board
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of Directors may from time to time determine or the business of the Corporation
may require.
ARTICLE II
----------
Meetings of Stockholders
------------------------
2.1 Places of Meetings. All meetings of the stockholders shall be held at
------------------
such place, either within or without the State of Maryland but within the United
States, as from time to time may be fixed by the majority of the Board of
Directors, the Chairman of the Board, if one is elected, or the President, which
place may subsequently be changed at any time by vote of the Board of Directors.
2.2 Annual Meetings. The annual meeting of the stockholders, for the
---------------
election of Directors and transaction of such other business as may come
properly before the meeting, shall be held at such date and time as shall be
determined by a majority of the Board of Directors, the Chairman of the Board,
if one is elected, or the President, which date and time may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
At any annual meeting of stockholders or any special meeting in lieu of
annual meeting of stockholders, only such business shall be conducted, and only
such proposals shall be acted upon, as shall have been properly brought before
such annual meeting. To be considered as properly brought before an annual
meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the annual meeting
in question) of any shares of stock of the Corporation entitled to vote at such
annual meeting who complies with the requirements set forth in Section 2.9.
2.3 Special Meetings. Except as otherwise required by law and subject to
----------------
the rights, if any, of the holders of any series of preferred stock of the
Corporation, special meetings of the stockholders may be called only by the
President or the Board of Directors pursuant to a resolution approved by the
affirmative vote of a majority of the Directors then in office. Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law. Special meetings of stockholders shall also be
called by the secretary of the Corporation upon the written request of the
holders of shares entitled to cast not less than a majority of all the votes
entitled to be cast at such meeting. Such request shall state the purpose of
such meeting and the matters proposed to be acted on at such meeting. The
secretary shall inform such stockholders of the reasonably estimated cost of
preparing and mailing notice of the meeting and, upon payment to the Corporation
by such stockholders of such costs, the secretary shall give notice to each
stockholder entitled to notice of the meeting.
2.4 Notice of Meetings; Adjournments. A written notice of each annual
--------------------------------
meeting stating the hour, date and place of such annual meeting shall be given
by the Secretary or an Assistant Secretary of the Corporation (or other person
authorized by these By-laws or by law) not less than 10 days nor more than 90
days before the annual meeting, to each stockholder entitled to vote thereat and
to each stockholder who, by
2
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law or under the Articles or under these By-laws, is entitled to such notice, by
personally delivering such notice to him or her, by leaving such notice at his
or her residence or usual place of business or by mailing it, postage prepaid,
addressed to such stockholder at the address of such stockholder as it appears
on the stock transfer books of the Corporation. Such notice shall be deemed to
be delivered when hand-delivered to such address or deposited in the mail so
addressed, with postage prepaid.
Notice of all special meetings of stockholders shall be given in the same
manner as provided for annual meetings, except that the written notice of all
special meetings shall state the purpose or purposes for which the meeting has
been called.
Notice of an annual meeting or special meeting of stockholders need not be
given to a stockholder if a written waiver of notice is signed before or after
such meeting by such stockholder or if such stockholder attends such meeting,
unless such attendance was for the express purpose of objecting at the beginning
of the meeting to the transaction of any business because the meeting was not
lawfully called or convened. Neither the business to be transacted at, nor the
purpose of, any annual meeting or special meeting of stockholders need be
specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously scheduled
annual meeting or special meeting of stockholders and any record date with
respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to this Section 2.4
or otherwise. In no event shall the Public Announcement of an adjournment,
postponement or rescheduling of any previously scheduled meeting of stockholders
commence a new time period for the giving of a stockholder's notice under
Section 2.9 of these By-laws.
When any meeting is convened, the presiding officer of the meeting may
adjourn the meeting if (a) no quorum is present for the transaction of business,
(b) the Board of Directors determines that adjournment is necessary or
appropriate to enable the stockholders to consider fully information that the
Board of Directors determines has not been made sufficiently or timely available
to stockholders or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any annual meeting or
special meeting of stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting, other than an announcement at
the meeting at which the adjournment is taken, of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
-------- -------
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat and each stockholder who, by
law or under the Articles or under these By-laws, is entitled to such notice.
2.5 Quorum. Except as otherwise required by the Articles or law, any number
------
of stockholders together holding at least a majority of the outstanding shares
of capital stock entitled to vote with respect to the business to be transacted,
who shall be present in person or represented by proxy at any meeting duly
called, shall constitute a quorum for the transaction of business. Where a
separate vote by a class or classes is required, a majority of the outstanding
shares of such class or classes, present in person or represented by proxy,
shall constitute a quorum entitled to take action with respect to that matter.
If, however, such quorum shall not be present at any meeting of the
stockholders, the stockholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at the meeting. At such adjourned meeting at
which a quorum is present, any business may be transacted which might have been
transacted at the meeting as originally noticed. The stockholders present at a
duly constituted meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of
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enough stockholders to leave less than a quorum.
2.6 Voting and Proxies. Stockholders shall have one vote for each share
------------------
of stock entitled to vote owned by them of record according to the stock
transfer books of the Corporation, unless otherwise provided by law or by the
Articles. A stockholder may cast the votes entitled to be cast by the shares of
stock owned of record by him either in person or by proxy executed in writing by
the stockholder or by his duly authorized agent. Such proxy shall be filed with
the secretary of the Corporation before or at the time of the meeting. No proxy
shall be valid after eleven months from the date of its execution, unless
otherwise provided in the proxy. Proxies shall be filed with the Secretary of
the meeting before being voted. Except as otherwise limited therein or as
otherwise provided by law, proxies authorizing a person to vote at a specific
meeting shall entitle the persons authorized thereby to vote at any adjournment
of such meeting, but they shall not be valid after final adjournment of such
meeting. A proxy with respect to stock held in the name of two or more persons
shall be valid if executed by or on behalf of any one of them unless at or prior
to the exercise of the proxy the Corporation receives a specific written notice
to the contrary from any one of them. A proxy purporting to be executed by or
on behalf of a stockholder shall be deemed valid, and the burden of proving
invalidity shall rest on the challenger.
2.7 Action at Meeting. When a quorum is present, any matter before any
-----------------
meeting of stockholders shall be decided by the affirmative vote of the majority
of shares present in person or represented by proxy at such meeting and entitled
to vote on such matter, except where a larger vote is required by law, by the
Articles or by these By-laws. Where a separate vote by a class or classes is
required, the affirmative vote of the majority of shares of such class or
classes present in person or represented by proxy at the meeting shall be the
act of such class. Any election by stockholders shall be determined by a
plurality of the votes of the shares present in person or represented by proxy
at the meeting and entitled to vote on the election of Directors, except where a
larger vote is required by law, by the Articles or by these By-laws. The
Corporation shall not directly or indirectly vote any shares of its own stock;
provided, however, that the Corporation may vote shares which it holds in a
- -------- -------
fiduciary capacity to the extent permitted by law.
2.8 Stockholder List. The officer or agent having charge of the stock
----------------
transfer books of the Corporation shall make, at least 10 days before every
annual meeting or special meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting or any adjournment thereof, in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least 10 days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the hour, date and place of the meeting during the whole
time thereof, and may be inspected by any stockholder who is present.
2.9 Stockholder Proposals. In addition to any other applicable
---------------------
requirements, for business to be properly brought before an annual meeting by a
stockholder of record (both as of the time notice of such proposal is given by
the stockholder as set forth below and as of the record date for the annual
meeting in question) of any shares of capital stock entitled to vote at such
annual meeting, such stockholder shall: (i) give timely written notice as
required by this Section 2.9 to the Secretary of the Corporation and (ii) be
present at such meeting, either in person or by a representative. For an annual
meeting, a stockholder's notice shall be timely if delivered to, or mailed to
and received by, the Corporation at its principal executive office not less than
75 days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting (the "Anniversary Date"); provided, however, that in
-------- -------
the event the annual meeting is scheduled to be held on a date more than 30 days
before the Anniversary Date or more than 60
4
<PAGE>
days after the Anniversary Date, a stockholder's notice shall be timely if
delivered to, or mailed to and received by, the Corporation at its principal
executive office not later than the close of business on the later of (1) the
75th day prior to the scheduled date of such annual meeting or (2) the 15th day
following the day on which Public Announcement of the date of such annual
meeting is first made by the Corporation.
A stockholder's notice to the Secretary of the Corporation shall set forth
as to each matter proposed to be brought before an annual meeting: (i) a brief
description of the business the stockholder desires to bring before such annual
meeting and the reasons for conducting such business at such annual meeting,
(ii) the name and address, as they appear on the stock transfer books of the
Corporation, of the stockholder proposing such business, (iii) the class and
number of shares of the capital stock of the Corporation beneficially owned by
the stockholder proposing such business, (iv) the names and addresses of the
beneficial owners, if any, of any capital stock of the Corporation registered in
such stockholder's name on such books, and the class and number of shares of the
capital stock of the Corporation beneficially owned by such beneficial owners,
(v) the names and addresses of other stockholders known by the stockholder
proposing such business to support such proposal, and the class and number of
shares of the capital stock of the Corporation beneficially owned by such other
stockholders and (vi) any material interest of the stockholder proposing to
bring such business before such meeting (or any other stockholders known to be
supporting such proposal) in such proposal.
If the Board of Directors or a designated committee thereof determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2.9 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2.9 in any material respect, such proposal shall not be presented for
action at the annual meeting in question. If neither the Board of Directors nor
such committee makes a determination as to the validity of any stockholder
proposal in the manner set forth above, the presiding officer of the annual
meeting shall determine whether the stockholder proposal was made in accordance
with the terms of this Section 2.9. If the presiding officer determines that
any stockholder proposal was not made in a timely fashion in accordance with the
provisions of this Section 2.9 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2.9 in any material respect, such proposal shall not be presented for
action at the annual meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 2.9, the presiding officer shall so declare at the annual meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this Section 2.9, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this Section 2.9, and
nothing in this Section 2.9 shall be deemed to affect any rights of stockholders
to request inclusion of proposals in the Corporation's proxy statement pursuant
to Rule 14a-8 under the Exchange Act (or any successor provision thereof).
2.10 Voting Procedures and Inspectors of Elections. The Corporation shall,
---------------------------------------------
in advance of any meeting of stockholders, appoint one or more inspectors to act
at the meeting and make a written report thereof. The Corporation may designate
one or more persons as alternate inspectors to replace any inspector who fails
to act. If no inspector or alternate is able to act at a meeting of
stockholders, the presiding officer shall appoint one or more inspectors to act
at the meeting. Any inspector may, but need not, be an officer, employee or
agent of the Corporation. Each inspector, before entering upon the discharge of
his or her duties, shall take and sign an oath faithfully to execute the duties
of inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall perform such duties as
5
<PAGE>
are required by the MGCL, including the counting of all votes and ballots. The
inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. The presiding
officer may review all determinations made by the inspectors, and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion and he or she shall not be bound by any determinations made by the
inspectors. All determinations by the inspectors and, if applicable, the
presiding officer, shall be subject to further review by any court of competent
jurisdiction.
2.11 Presiding Officer. The Chairman of the Board, if one is elected, or if
-----------------
not elected or in his or her absence, one of the following officers shall
preside at any annual meeting or special meeting of stockholders in the order
stated: the President, the vice presidents in their order of rank and
seniority, the Secretary, an Assistant Secretary or a person chosen by the
stockholders entitled to cast a majority of the votes which all stockholders
present in person or by proxy are entitled to cast. Such presiding officer
shall have the power, among other things, to adjourn such meeting at any time
and from time to time, subject to Sections 2.4 and 2.5 of this Article II. The
order of business and all other matters of procedure at any meeting of the
stockholders shall be determined by the presiding officer.
ARTICLE III
-----------
Directors
---------
3.1 General Powers. The business and affairs of the Corporation shall be
--------------
managed under the direction of the Board of Directors and, except as otherwise
expressly provided by law, the Articles or these By-laws, all of the powers of
the Corporation shall be vested in such Board.
3.2 Number of Directors. The number of Directors shall be as provided in
-------------------
Article VI of the Articles. The Directors shall hold office in the manner
provided in the Articles.
3.3 Election and Removal of Directors; Quorum.
-----------------------------------------
(a) Directors shall be elected and removed in the manner provided for in
Article VI of the Articles.
(b) Vacancies in the Board of Directors shall be filled in the manner
provided for in Article VI of the Articles.
(c) At any meeting of the Board of Directors, a majority of the number
of Directors then in office shall constitute a quorum for the transaction of
business. However, if less than a quorum is present at a meeting, a majority of
the Directors present may adjourn the meeting from time to time, and the meeting
may be held as adjourned without further notice, except as provided in Section
3.6 of this Article III. Any business which might have been transacted at the
meeting as originally noticed may be transacted at such adjourned meeting at
which a quorum is present.
(d) No Director need be a stockholder of the Corporation.
(e) A Director may resign at any time by giving written notice to the
Chairman of the Board, if one is elected, the President or the Secretary. A
resignation shall be effective upon receipt, unless the resignation otherwise
provides.
3.4 Regular Meetings. The regular annual meeting of the Board of Directors
----------------
shall be held,
6
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without notice other than this Section 3.4, on the same date and at the same
place as the annual meeting following the close of such meeting of stockholders.
Other regular meetings of the Board of Directors may be held at such hour, date
and place as the Board of Directors may by resolution from time to time
determine without notice other than such resolution.
3.5 Special Meetings. Special meetings of the Board of Directors may be
----------------
called, orally or in writing, by or at the request of a majority of the
Directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
3.6 Notice of Meetings. Notice of the hour, date and place of all special
------------------
meetings of the Board of Directors shall be given to each Director by the
Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting of
the Board of Directors shall be given to each Director in person, by telephone,
or by facsimile, telex, telecopy, telegram, or other written form of electronic
communication, sent to his or her business or home address, at least 24 hours in
advance of the meeting, or by written notice mailed to his or her business or
home address, at least 48 hours in advance of the meeting. Such notice shall be
deemed to be delivered when hand delivered to such address, read to such
Director by telephone, deposited in the mail so addressed, with postage thereon
prepaid if mailed, dispatched or transmitted if faxed, telexed or telecopied, or
when delivered to the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is adjourned
for 30 days or more, notice of the adjourned meeting shall be given as in the
case of an original meeting. It shall not be necessary to give any notice of
the hour, date or place of any meeting adjourned for less than 30 days or of the
business to be transacted thereat, other than an announcement at the meeting at
which such adjournment is taken of the hour, date and place to which the meeting
is adjourned.
A written waiver of notice signed before or after a meeting by a Director
and filed with the records of the meeting shall be deemed to be equivalent to
notice of the meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends a
meeting for the express purpose of objecting at the beginning of the meeting to
the transaction of any business because such meeting is not lawfully called or
convened. Except as otherwise required by law, by the Articles or by these By-
laws, neither the business to be transacted at, nor the purpose of, any meeting
of the Board of Directors need be specified in the notice or waiver of notice of
such meeting.
3.7 Nominations. Nominations of candidates for election as Directors of the
-----------
Corporation at any annual meeting may be made only (a) by, or at the direction
of, a majority of the Board of Directors or (b) by any stockholder of record
(both as of the time notice of such nomination is given by the stockholder as
set forth below and as of the record date for the annual meeting in question) of
any shares of the stock of the Corporation entitled to vote at such annual
meeting who complies with the timing, informational and other requirements set
forth in this Section 3.7. Any stockholder who has complied with the timing,
informational and other requirements set forth in this Section 3.7 and who seeks
to make such a nomination must be, or his, her or its representative must be,
present in person at the annual meeting. Only persons nominated in accordance
with the procedures set forth in this Section 3.7 shall be eligible for election
as Directors at an annual meeting.
Nominations, other than those made by, or at the direction of, the Board of
Directors shall be made pursuant to timely notice in writing to the Secretary of
the Corporation as set forth in this Section 3.7. For
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an annual meeting, a stockholder's notice shall be timely if delivered to, or
mailed to and received by, the Corporation at its principal executive office not
less than 75 days nor more than 120 days prior to the Anniversary Date;
provided, however, that in the event the annual meeting is scheduled to be held
- -------- -------
on a date more than 30 days before the Anniversary Date or more than 60 days
after the Anniversary Date, a stockholder's notice shall be timely if delivered
to, or mailed and received by, the Corporation at its principal executive office
not later than the close of business on the later of (x) the 75th day prior to
the scheduled date of such annual meeting or (y) the 15th day following the day
on which Public Announcement of the date of such annual meeting is first made by
the Corporation.
A stockholder's notice to the Secretary of the Corporation shall set forth
as to each person whom the stockholder proposes to nominate for election or re-
election as a Director: (1) the name, age, business address and residence
address of such person; (2) the principal occupation or employment of such
person; (3) the class and number of shares of the capital stock of the
Corporation which are beneficially owned by such person on the date of such
stockholder notice; and (4) the consent of each nominee to serve as a Director
if elected. A stockholder's notice to the Secretary of the Corporation shall
further set forth as to the stockholder giving such notice: (a) the name and
address, as they appear on the stock transfer books of the Corporation, of such
stockholder and of the beneficial owners (if any) of the capital stock of the
Corporation registered in such stockholder's name and the name and address of
other stockholders known by such stockholder to be supporting such nominee(s);
(b) the class and number of shares of the capital stock of the Corporation which
are held of record, beneficially owned or represented by proxy by such
stockholder and by any other stockholders known by such stockholder to be
supporting such nominee(s) on the record date for the annual meeting in question
(if such date shall then have been made publicly available and shall be earlier
than the date of such stockholder notice) and on the date of such stockholder's
notice; and (c) a description of all arrangements or understandings between such
stockholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are to be made by
such stockholder.
If the Board of Directors or a designated committee thereof determines that
any stockholder nomination was not made in accordance with the terms of this
Section 3.7 or that the information provided in a stockholder's notice does not
satisfy the informational requirements of this Section 3.7 in any material
respect, then such nomination shall not be considered at the annual meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3.7, the presiding officer of the annual meeting
shall determine whether a nomination was made in accordance with such
provisions. If the presiding officer determines that any stockholder nomination
was not made in accordance with the terms of this Section 3.7 or that the
information provided in a stockholder's notice does not satisfy the
informational requirements of this Section 3.7 in any material respect, then
such nomination shall not be considered at the annual meeting in question. If
the Board of Directors, a designated committee thereof or the presiding officer
determines that a nomination was made in accordance with the terms of this
Section 3.7, the presiding officer shall so declare at the annual meeting and
ballots shall be provided for use at the meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second paragraph of this
Section 3.7, in the event that the number of Directors to be elected to the
Board of Directors is increased and there is no Public Announcement by the
Corporation naming all of the nominees for Director or specifying the size of
the increased Board of Directors at least 75 days prior to the Anniversary Date,
a stockholder's notice required by this Section 3.7 shall also be considered
timely, but only with respect to nominees for any new positions created by such
increase, if such notice shall be delivered to, or mailed to and received by,
the Corporation at its principal executive office not later than the close of
business on the 15th day following the day on
8
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which such Public Announcement is first made by the Corporation.
No person shall be elected by the stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 3.7. Election of Directors at an annual meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such annual meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the annual meeting in accordance with the procedures set forth in this Section
3.7 shall be provided for use at the annual meeting.
3.8 Action at Meeting and by Consent. (a) At any meeting of the Board of
--------------------------------
Directors at which a quorum is present, a majority of the Directors present may
take any action on behalf of the Board of Directors, unless otherwise required
by law, by the Articles or by these By-laws.
(b) Any action required or permitted to be taken at any meeting of the
Board of Directors may be taken without a meeting if all members of the Board of
Directors consent thereto in writing. Such written consent shall be filed with
the records of the meetings of the Board of Directors and shall be treated for
all purposes as a vote at a meeting of the Board of Directors.
3.9 Manner of Participation. Directors may participate in meetings of the
-----------------------
Board of Directors by means of conference telephone or similar communications
equipment by means of which all Directors participating in the meeting can hear
each other, and participation in a meeting in accordance herewith shall
constitute presence in person at such meeting for purposes of these By-laws.
3.10 Compensation of Directors. By resolution of the Board of Directors,
-------------------------
Directors may be allowed a fee for serving as a Director and a fee and expenses
for attendance at a meeting of the Board, but nothing herein shall preclude
Directors from serving the Corporation in other capacities and receiving
compensation for such other services.
3.11 Reliance. Each Director, officer, employee and agent of the Corporation
--------
shall, in the performance of his duties with respect to the Corporation, be
fully justified and protected with regard to any act or failure to act in
reliance in good faith upon the books of account or other records of the
Corporation, upon an opinion of counsel or upon reports made to the Corporation
by any of its officers or employees or by the adviser, accountants, appraisers
or other experts or consultants selected by the Board of Directors or officers
of the Corporation, regardless of whether such counsel or expert may also be a
Director.
3.12 Certain Rights of Directors, Officers, Employees or Agents. The
----------------------------------------------------------
directors shall have no responsibility to devote their full time to the affairs
of the Corporation. Any directors or officer, employee or agent of the
Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.
ARTICLE IV
----------
Committees
----------
4.1 Number, Tenure and Qualifications. The Board of Directors may appoint
---------------------------------
from among its members an Executive Committee, an Audit Committee, a
Compensation Committee and other standing or
9
<PAGE>
special committees of the Board of Directors as it may deem advisable, composed
of one two or more Directors, to serve at the pleasure of the Board of
Directors. The members, terms and authority of such committees shall be as set
forth in the resolutions establishing the same.
4.2 Powers. The Board of Directors may delegate to committees appointed
------
under Section 4.1 of this Article any of the powers of the Board of Directors,
except as prohibited by law.
4.3 Meetings. Notice of committee meetings shall be given in the same
--------
manner as notice for special meetings of the Board of Directors. A majority of
the members of the committee shall constitute a quorum for the transaction of
business at any meeting of the committee. The act of a majority of the
committee members present at a meeting shall be the act of such committee. The
Board of Directors may designate a chairman of any committee, and such chairman
or any two members of any committee (if there are at least two members of the
Committee) may fix the time and place of its meeting unless the Board shall
otherwise provide. In the absence of any member of any such committee, the
members thereof present at any meeting, whether or not they constitute a quorum,
may appoint another Director to act in the place of such absent member. Each
committee shall keep minutes of its proceedings.
4.4 Telephone Meetings. Members of a committee of the Board of Directors
------------------
may participate in a meeting by means of a conference telephone or similar
communications equipment if all persons participating in the meeting can hear
each other at the same time. Participation in a meeting by these means shall
constitute presence in person at the meeting.
4.5 Informal Action by Committees. Any action required or permitted to be
-----------------------------
taken at any meeting of a committee of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
member of the committee and such written consent is filed with the minutes of
proceedings of such committee.
4.6 Vacancies. Subject to the provisions hereof, the Board of Directors
---------
shall have the power at any time to change the membership of any committee, to
fill all vacancies, to designate alternate members, to replace any absent or
disqualified member or to dissolve any such committee.
ARTICLE V
---------
Officers
--------
5.1 Enumeration. The officers of the Corporation shall consist of a
-----------
President, a Treasurer, a Secretary and such other officers, including, without
limitation, a Chairman of the Board of Directors, a Chief Executive Officer, a
Chief Operating Officer and one or more Vice Presidents (including Executive
Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant
Treasurers and Assistant Secretaries, and such other officers as the Board of
Directors may determine.
5.2 Election. At the regular annual meeting of the Board following the
--------
annual meeting of stockholders, the Board of Directors shall elect the
President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular annual meeting of the Board of Directors
or at any other regular or special meeting.
5.3 Qualification. No officer need be a stockholder or a Director. Any
-------------
person may occupy more than one office of the Corporation at any time; provided,
--------
that such officer does not serve concurrently as both President and Vice
President. Any officer may be required by the Board of Directors to give bond
for
10
<PAGE>
the faithful performance of his or her duties in such amount and with such
sureties as the Board of Directors may determine.
5.4 Tenure. Except as otherwise provided by the Articles or by these By-
------
laws, each of the officers of the Corporation shall hold office until the
regular annual meeting of the Board of Directors following the next annual
meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
5.5 Resignation. Any officer may resign by delivering his or her written
-----------
resignation to the Corporation addressed to the President or the Secretary, and
such resignation shall be effective upon receipt unless it is specified to be
effective at some other time or upon the happening of some other event; provided
--------
however, that such resignation shall be without prejudice to the contract
- -------
rights, if any, of the Corporation.
5.6 Removal. Except as otherwise provided by law, if the Board of Directors
-------
in its judgement finds that the best interests of the Corporation will be
served, it may remove any officer by the affirmative vote of a majority of the
Directors then in office; provided however, that such removal shall be without
-------- -------
prejudice to the contract rights, if any, of the person so removed.
5.7 Absence or Disability. In the event of the absence or disability of any
---------------------
officer, the Board of Directors may designate another officer to act temporarily
in place of such absent or disabled officer.
5.8 Vacancies. Any vacancy in any office may be filled for the unexpired
---------
portion of the term by the Board of Directors.
5.9 President. The President shall, subject to the direction of the Board
---------
of Directors, have general supervision and control of the Corporation's
business. If there is no Chairman of the Board or if he or she is absent, the
President shall preside, when present, at all meetings of stockholders and of
the Board of Directors. The President shall have such other powers and perform
such other duties as the Board of Directors may from time to time designate.
5.10 Chairman of the Board. The Chairman of the Board, if one is elected,
---------------------
shall preside, when present, at all meetings of the stockholders and of the
Board of Directors. The Chairman of the Board shall have such other powers and
shall perform such other duties as the Board of Directors may from time to time
designate.
5.11 Chief Executive Officer. The Chief Executive Officer, if one is
-----------------------
elected, shall have such powers and shall perform such duties as the Board of
Directors may from time to time designate. If there shall be a Chief Executive
Officer at any time, such officer shall have authority to take any action that
the President is authorized to take.
5.12 Vice Presidents and Assistant Vice Presidents. Any Vice President
---------------------------------------------
(including any Executive Vice President or Senior Vice President) and any
Assistant Vice President shall have such powers and shall perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
5.13 Treasurer and Assistant Treasurers. The Treasurer shall, subject to the
----------------------------------
direction of the Board of Directors and except as the Board of Directors or the
President may otherwise provide, have general charge of the financial affairs of
the Corporation and shall cause to be kept accurate books of account. The
Treasurer shall have custody of all funds, securities, and valuable documents of
the Corporation. He or she
11
<PAGE>
shall have such other duties and powers as may be designated from time to time
by the Board of Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
5.14 Secretary and Assistant Secretaries. The Secretary shall record all the
-----------------------------------
proceedings of the meetings of the stockholders and the Board of Directors
(including committees of the Board) in books kept for that purpose. In his or
her absence from any such meeting, a temporary secretary chosen at the meeting
shall record the proceedings thereof. The Secretary shall have charge of the
stock ledger (which may, however, be kept by any transfer or other agent of the
Corporation). The Secretary shall have custody of the seal of the Corporation,
and the Secretary, or an Assistant Secretary, shall have authority to affix it
to any instrument requiring it, and, when so affixed, the seal may be attested
by his or her signature or that of an Assistant Secretary. The Secretary shall
have such other duties and powers as may be designated from time to time by the
Board of Directors or the Chief Executive Officer. In the absence of the
Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors or the Chief Executive Officer may from time to time
designate.
5.15 Other Powers and Duties. Subject to these By-laws and to such
-----------------------
limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors, the Chairman of the
Board or the President.
ARTICLE VI
----------
Stock
-----
6.1 Certificates. Each stockholder shall be entitled to a certificate of
------------
the stock of the Corporation, which shall represent and certify the number of
shares of each class held by such stockholder in the Corporation, in such form
as may from time to time be prescribed by the Board of Directors. Such
certificate shall be signed by the Chairman of the Board, the President or a
Vice President and countersigned by the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary. The Corporation seal and the
signatures by the Corporation's officers, the transfer agent or the registrar
may be either manual or facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed on such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, the certificate may be issued by the
Corporation with the same effect as if he or she were such officer, transfer
agent or registrar at the time of its issue. Each certificate representing
shares which are restricted as to their transferability or voting powers, which
are preferred or limited as to their dividends or as to their allocable portion
of the assets upon liquidation or which are redeemable at the option of the
Corporation, shall have a statement of such restriction, limitation, preference
or redemption provision, or a summary thereof, plainly stated on the
certificate. If the Corporation has authority to issue stock of more than one
class, the certificate shall contain on the face or back a full statement or
summary of the designations and any preferences, conversion on other rights,
voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption of each
class of stock and, if the Corporation is authorized to issue any preferred or
special class in series, the differences in the relative rights and preferences
between the shares of each series to the extent they have been set and the
authority of the Board of Directors to set the relative rights
12
<PAGE>
and preferences of subsequent series. In lieu of such statement or summary, the
certificate may state that the Corporation will furnish a full statement of such
information to any stockholder upon request and without charge. If any class of
stock is restricted by the Corporation as to transferability, the certificate
shall contain a full statement of the restriction or state that the Corporation
will furnish information about the restrictions to the stockholder on request
and without charge. Every certificate for shares of stock which are subject to a
restriction on transfer (as provided in Article IX of the Articles) and every
certificate issued when the Corporation is authorized to issue more than one
class or series of stock shall contain such legend (as provided in Article VII
of the Articles) with respect thereto as is required by law.
6.2 Lost, Destroyed and Mutilated Certificates. Holders of the shares of
------------------------------------------
the stock of the Corporation shall immediately notify the Corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board of
Directors may in its discretion cause one or more new certificates for the same
number of shares in the aggregate to be issued to such stockholder upon the
surrender of the mutilated certificate or upon satisfactory proof of such loss
or destruction, and the deposit of a bond in such form and amount and with such
surety as the Board of Directors may require.
6.3 Transfer of Stock. Subject to the restrictions on transfer of stock
-----------------
described in Article IX of the Articles, shares of stock of the Corporation
shall be transferable or assignable only on the stock transfer books of the
Corporation by the holder in person or by attorney upon surrender to the
Corporation or its transfer agent of the certificate theretofore properly
endorsed or, if sought to be transferred by attorney, accompanied by a written
assignment or power of attorney properly executed, with transfer stamps (if
necessary) affixed, and with such proof of the authenticity of signatures as the
Corporation or its transfer agent may reasonably require.
6.4 Record Holders. Except as may otherwise be required by law, by the
--------------
Articles or by these By-laws, the Corporation shall be entitled to treat the
record holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
thereto, regardless of any transfer, pledge or other disposition of such stock,
until the shares have been transferred on the books of the Corporation in
accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the Corporation of his or
her postal address and any changes thereto.
6.5 Record Date. In order that the Corporation may determine the
-----------
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date: (a) in the case of
determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than ninety nor less than
ten days before the date of such meeting and (b) in the case of any other
action, shall not be more than ninety days prior to such other action. If no
record date is fixed: (i) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (ii) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
ARTICLE VII
-----------
13
<PAGE>
Indemnification
---------------
7.1 Indemnification. To the maximum extent permitted by Maryland law in
---------------
effect from time to time, the Corporation (which, for the purpose of this
Article VII, shall include predecessor entities of the Corporation) shall
indemnify and, without requiring a preliminary determination of the ultimate
entitlement to indemnification, shall pay or reimburse reasonable expenses in
advance of final disposition of a proceeding to (a) any individual who is a
present or former Director, trustee or officer, employee, agent or shareholder
of the Corporation and who is made a party to the proceeding by reason of his
service in that capacity or (b) any individual who, while a Director of the
Corporation and at the request of the Corporation, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the By-laws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect any act
or failure to act which occurred prior to such amendment, repeal or adoption.
7.2 Contractual Nature of Rights. The foregoing provision of this Article
----------------------------
VII shall be deemed to be a contract between the Corporation and each Director
and officer entitled to the benefits hereof at any time while this Article VII
is in effect, and any repeal or modification thereof shall not affect any rights
or obligations then existing with respect to any state of facts then or
theretofore existing or any proceeding theretofore or thereafter brought based
in whole or in part upon any such state of facts. If a claim for
indemnification or advancement of expenses hereunder by a Director or officer is
not paid in full by the Corporation within (a) 60 days after the receipt by the
Corporation of a written claim for indemnification or (b) in the case of a
Director, 10 days after the receipt by the Corporation of documentation of
expenses and the required undertaking, such Director or officer may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Director or officer shall
also be entitled to be paid the expenses of prosecuting such claim. The failure
of the Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such indemnification or, in the case of a Director,
advancement of expenses, under this Article VII shall not be a defense to the
action and shall not create a presumption that such indemnification or
advancement is not permissible. It is the parties' intention that if the
Corporation contests any Director's, officer's or employee's right to
indemnification, the question of such Director's, officer's or employee's right
to indemnification shall be for the court to decide, and neither the failure of
the Corporation (including its Board of Directors, any committee or subgroup of
the Board of Directors, independent legal counsel, or its stockholders) to have
made a determination that indemnification of such Director, officer or employee
is proper in the circumstances because the Director, officer or employee has met
the applicable standard of conduct required by applicable law, nor an actual
determination by the Corporation (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) that the Director, officer or employee has not met such
applicable standard of conduct, shall create a presumption that such Director,
officer or employee has or has not met the applicable standard of conduct.
7.3 Non-Exclusivity of Rights. The rights to indemnification and
-------------------------
advancement of expenses set forth in this Article VII shall not be exclusive of
any other right which any Director, officer or employee may have or hereafter
acquire under any statute, provision of the Articles or these By-laws,
agreement, vote of stockholders or disinterested Directors or otherwise.
14
<PAGE>
7.4 Partial Indemnification. If any Director, officer or employee is
-----------------------
entitled under any provision of these By-laws to indemnification by the
Corporation for some or a portion of the expenses, judgments, fines or penalties
actually or reasonably incurred by him in the investigation, defense, appeal or
settlement of any civil or criminal action or proceeding, but not, however, for
the total amount thereof, the Corporation shall nevertheless indemnify such
Director, officer or employee for the portion of such expenses, judgments, fines
or penalties to which such Director, officer or employee is entitled.
7.5 Mutual Acknowledgment. By accepting any potential benefits under this
---------------------
Article VII each Director, officer or employee acknowledges that in certain
instances, Federal law or applicable public policy may prohibit the Corporation
from indemnifying its Directors, officers and employees under these By-laws or
otherwise. The Director, officer or employee understands and acknowledges that
the Corporation has undertaken and may be required in the future to undertake
with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Corporation's right under public policy to indemnify Director, officer or
employee.
7.6 Insurance. The Corporation may maintain insurance, at its expense, to
---------
protect itself and any Director, officer or employee against any liability of
any character asserted against or incurred by the Corporation or any such
Director, officer or employee, or arising out of any such person's corporate
status, whether or not the Corporation would have the power to indemnify such
person against such liability under the MGCL or the provisions of this Article
VII.
ARTICLE VIII
------------
Miscellaneous Provisions
------------------------
8.1 Seal. The seal of the Corporation shall consist of a flat-faced
----
circular die, of which there may be any number of counterparts, on which there
shall be engraved the word "Seal" and the name of the Corporation. The Board of
Directors shall have the power to adopt and alter the seal of the Corporation.
8.2 Fiscal Year. The fiscal year of the Corporation shall be a calendar
-----------
year or as may otherwise be fixed by the Board of Directors.
8.3 Checks, Notes and Drafts. Checks, notes, drafts and other orders for
------------------------
the payment of money shall be signed by such persons as the Board of Directors
from time to time may authorize. When the Board of Directors so authorizes,
however, the signature of any such person may be a facsimile.
8.4 Execution of Instruments. All deeds, leases, transfers, contracts,
------------------------
bonds, notes and other obligations to be entered into by the Corporation in the
ordinary course of its business without Director action may be executed on
behalf of the Corporation by the Chairman of the Board, if one is elected, the
President or the Treasurer or any other officer, employee or agent of the
Corporation as the Board of Directors or Executive Committee may authorize.
8.5 Resident Agent. The Board of Directors may appoint a resident agent
--------------
upon whom legal process may be served in any action or proceeding against the
Corporation.
8.6 Corporate Records. The original or attested copies of the Articles, By-
-----------------
laws and records of all meetings of the incorporators, stockholders and the
Board of Directors and the stock transfer books, which shall contain the names
of all stockholders, their record addresses and the amount of stock held by
each, may be kept outside the State of Maryland and shall be kept at the
principal office of the Corporation, at the
15
<PAGE>
office of its counsel or at an office of its transfer agent or at such other
place or places as may be designated from time to time by the Board of
Directors.
8.7 Amendment of By-laws. Except as provided otherwise by law, these By-
--------------------
laws may be amended or repealed solely by the Board of Directors by the
affirmative vote of a majority of the Directors then in office.
8.8 Voting of Stock Held. Unless otherwise provided by resolution of the
--------------------
Board of Directors or of the Executive Committee, if any, the Chairman of the
Board, if one is elected, the President or the Treasurer may from time to time
waive notice of and act on behalf of this Corporation, or appoint an attorney or
attorneys or agent or agents of the Corporation, in the name and on behalf of
the Corporation, to cast the vote that the Corporation may be entitled to cast
as a stockholder or otherwise in any other corporation, any of whose securities
may be held by the Corporation, at meetings of the holders of the shares or
other securities of such other corporation, or to consent in writing to any
action by any such other corporation; and the Chairman of the Board, if one is
elected, the President or the Treasurer shall instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent and may
execute or cause to be executed on behalf of the Corporation, and under its
corporate seal or otherwise, such written proxies, consents, waivers or other
instruments as may be necessary or proper in the premises. In lieu of such
appointment, the Chairman of the Board, if one is elected, the President or the
Treasurer may himself or herself attend any meetings of the holders of shares or
other securities of any such other corporation and there vote or exercise any or
all power of the Corporation as the holder of such shares or other securities of
such other corporation.
Adopted and effective as of ____________, 1999.
16
<PAGE>
EXHIBIT 4.1
FORM OF
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PROPERTY CAPITAL TRUST LIMITED PARTNERSHIP
(formerly known as Framingham York Associates Limited Partnership)
THE PARTNERSHIP INTERESTS OF THE LIMITED PARTNERS ISSUED PURSUANT TO THIS
LIMITED PARTNERSHIP AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 OR UNDER THE SECURITIES OR "BLUE SKY" LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THEY ARE REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND ANY OTHER APPLICABLE SECURITIES OR "BLUE
SKY" LAWS, OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH
PARTNERSHIP INTERESTS ARE SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN
THIS AGREEMENT.
_________________, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C>
ARTICLE 1 - DEFINED TERMS .................................................. 2
ARTICLE 2 - ORGANIZATIONAL MATTERS ......................................... 11
Section 2.1 Formation ................................................ 11
Section 2.2 Name ..................................................... 12
Section 2.3 Principal Office ......................................... 12
Section 2.4 Power of Attorney ........................................ 12
Section 2.5 Term ..................................................... 13
ARTICLE 3 - PURPOSE ........................................................ 13
Section 3.1 Purpose and Business ..................................... 13
Section 3.2 Powers ................................................... 14
ARTICLE 4 - CAPITAL CONTRIBUTIONS .......................................... 14
Section 4.1 Capital Contributions of the Partners .................... 14
Section 4.2 Issuances of Additional Partnership Interests ............ 15
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares ...... 16
ARTICLE 5 - DISTRIBUTIONS .................................................. 16
Section 5.1 Requirement and Characterization of Distributions ........ 16
Section 5.2 Amounts Withheld ......................................... 17
Section 5.3 Distributions Upon Liquidation ........................... 17
Section 5.4 Revisions to Reflect Issuance of Additional Partnership
Interests ................................................ 17
ARTICLE 6 - ALLOCATIONS .................................................... 18
Section 6.1 Allocations For Capital Account Purposes ................. 18
ARTICLE 7 - MANAGEMENT AND OPERATIONS OF BUSINESS .......................... 19
Section 7.1 Management ............................................... 19
Section 7.2 Certificate of Limited Partnership ....................... 22
Section 7.3 Restrictions on General Partner Authority ................ 23
Section 7.4 Reimbursement of the General Partner and the Company;
DRIP's and Repurchase Programs ........................... 23
Section 7.5 Outside Activities of the General Partner ................ 24
Section 7.6 Contracts with Affiliates ................................ 24
Section 7.7 Indemnification .......................................... 25
Section 7.8 Liability of the General Partner ......................... 26
Section 7.9 Other Matters Concerning the General Partner ............. 27
Section 7.10 Title to Partnership Assets .............................. 27
Section 7.11 Reliance by Third Parties ................................ 28
ARTICLE 8 - RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS ..................... 28
Section 8.1 Limitation of Liability .................................. 28
Section 8.2 Management of Business ................................... 28
Section 8.3 Outside Activities of Limited Partners ................... 29
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Section 8.4 Return of Capital ........................................ 29
Section 8.5 Rights of Limited Partners Relating to the Partnership ... 29
Section 8.6 Common Unit Redemption Right ............................. 30
Section 8.7 Series A Preferred Units Redemption Right ................ 31
Section 8.8 Series B Preferred Units Redemption Right ................ 31
ARTICLE 9 - BOOKS, RECORDS, ACCOUNTING AND REPORTS ......................... 31
Section 9.1 Records and Accounting ................................... 31
Section 9.2 Fiscal Year .............................................. 32
Section 9.3 Reports .................................................. 32
ARTICLE 10 - TAX MATTERS ................................................... 32
Section 10.1 Preparation of Tax Returns ............................... 32
Section 10.2 Tax Elections ............................................ 32
Section 10.3 Tax Matters Partner ...................................... 33
Section 10.4 Organizational Expenses .................................. 34
Section 10.5 Withholding .............................................. 34
ARTICLE 11 - TRANSFERS AND WITHDRAWALS ..................................... 35
Section 11.1 Transfer ................................................. 35
Section 11.2 Limited Partners' Rights to Transfer ..................... 35
Section 11.3 Substituted Limited Partners ............................. 36
Section 11.4 Assignees ................................................ 36
Section 11.5 General Provisions ....................................... 37
ARTICLE 12 - ADMISSION OF PARTNERS ......................................... 37
Section 12.1 Admission of Successor General Partner ................... 37
Section 12.2 Admission of Additional Limited Partners ................. 38
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership .............................................. 38
ARTICLE 13 - DISSOLUTION, LIQUIDATION AND TERMINATION ...................... 38
Section 13.1 Dissolution .............................................. 38
Section 13.2 Winding Up ............................................... 39
Section 13.3 Compliance with Timing Requirements of Regulations ....... 41
Section 13.4 Deemed Termination ....................................... 41
Section 13.5 Rights of Limited Partners ............................... 41
Section 13.6 Notice of Dissolution .................................... 41
Section 13.7 Termination of Partnership and Cancellation of Certificate
of Limited Partnership ................................... 41
Section 13.8 Reasonable Time for Winding-Up ........................... 42
Section 13.9 Waiver of Partition ...................................... 42
ARTICLE 14 - AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS .................. 42
Section 14.1 Amendments ............................................... 42
Section 14.2 Meetings of the Partners ................................. 43
ARTICLE 15 - GENERAL PROVISIONS ............................................ 45
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
Section 15.1 Restrictive Covenants .................................... 45
Section 15.2 Addresses and Notice ..................................... 45
Section 15.3 Titles and Captions ...................................... 45
Section 15.4 Pronouns and Plurals ..................................... 45
Section 15.5 Further Action ........................................... 45
Section 15.6 Binding Effect ........................................... 45
Section 15.7 Creditors ................................................ 46
Section 15.8 Waiver ................................................... 46
Section 15.9 Counterparts ............................................. 46
Section 15.10 Applicable Law ........................................... 46
Section 15.11 Invalidity of Provisions ................................. 46
Section 15.12 Entire Agreement ......................................... 46
</TABLE>
EXHIBITS
Exhibit A-1 - Partners Contributions and Partnership Interests
Exhibit A-2 - Partners Capital Accounts
Exhibit B - Capital Account Maintenance
Exhibit C - Special Allocation Rules
Exhibit D - Notice of Redemption
Exhibit E - Recourse Debt Level Schedule
Exhibit F - Series A Preferred Units Redemption Right
Exhibit G - Series B Preferred Units Redemption Right
(iii)
<PAGE>
FORM OF
SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PROPERTY CAPITAL TRUST LIMITED PARTNERSHIP
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF
PROPERTY CAPITAL TRUST LIMITED PARTNERSHIP (this "Agreement"), dated as of
__________, 1999, is entered into by and among Property Capital Trust, Inc., a
Maryland corporation (the "Company"), and the Persons (as defined below) whose
names are set forth on Exhibit A-1 attached hereto (as it may be amended from
-----------
time to time).
WHEREAS, this Partnership, originally known as Framingham York Laboratories
Associates Limited Partnership (which name was subsequently changed to
Framingham York Associates Limited Partnership), was formed on September 27,
1984 pursuant to the Uniform Limited Partnership Act of Massachusetts, as
amended (the "Act");
WHEREAS, an Amended and Restated Agreement of Limited Partnership of the
Partnership, dated as of December 21, 1984, was entered into among Bruce A. Beal
and Robert L. Beal, each an individual, as general partners, and certain of
those Persons whose names are set forth on Exhibit A-1, as limited partners (the
-----------
"Original Agreement");
WHEREAS, the Partnership entered into a Contribution and Merger Agreement,
dated as of October __, 1998, with Property Capital Trust Limited Partnership, a
Massachusetts limited partnership ("PCT LP"), pursuant to which PCT LP would be
merged with and into the Partnership, with the Partnership as the surviving
limited partnership (the "PCT LP Merger");
WHEREAS, the PCT LP Merger became effective on the date hereof;
WHEREAS, in connection with the PCT LP Merger and in exchange for the
interest of each partner of the Partnership and PCT LP, as set forth in Exhibit
-------
A-1 attached hereto, additional Persons have been admitted into the Partnership
- ---
as limited partners and general partner;
WHEREAS, the Partners have agreed that the fair market value of the assets
of the surviving limited partnership at the time of the contribution thereof is
equal to $3,000,000 (after the deduction of the liabilities to which such assets
are subject);
WHEREAS, the Partners have agreed that their Capital Account (as
hereinafter defined) balances shall be restated as set forth on Exhibit A-2;
-----------
attached hereto;
WHEREAS, the Partnership changed its name to Property Capital Trust Limited
Partnership; and
WHEREAS, the Partners of the Partnership desire to amend and restate the
Original Agreement on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the Partners hereby amend and restate this Agreement as set
forth in full below pursuant to the authority granted to the Partners under
Section 9.11 of the Original Agreement and adopt this Second Amended and
Restated Agreement in full substitution of the Original Agreement.
<PAGE>
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" has the meaning set forth in the recitals hereof.
---
"Additional Limited Partner" means a Person admitted to the Partnership as
--------------------------
a Limited Partner pursuant to Sections 4.2 and 12.2 hereof and who is shown as
such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for each
------------------------
Partner as of the end of each Partnership taxable year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and (ii) decreased by the items described in Regulations Sections 1.704-
1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6). The
foregoing definition of Adjusted Capital Account is intended to comply with the
provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner, the
--------------------------------
deficit balance, if any, in such Partner's Adjusted Capital Account as of the
end of the relevant Partnership taxable year.
"Adjusted Property" means any property, the Carrying Value of which has
-----------------
been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed
---------
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.
---------
"Affiliate" means, with respect to any Person, any Person directly or
---------
indirectly controlling, controlled by or under common control with such Person.
For purposes of this definition, "control," when used with respect to any
Person, means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting securities, by
contract or otherwise, and the terms "controlling" and "controlled" have
meanings correlative to the foregoing. No officer, director or stockholder of
the General Partner shall be considered an Affiliate of the General Partner
solely as a result of serving in such capacity or being a stockholder of the
General Partner.
"Agreed Value" means (i) in the case of any Contributed Property as of the
------------
time of its contribution to the Partnership, the 704(c) Value of such property,
reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations
thereunder. The aggregate Agreed Value of the Contributed Property contributed
or deemed contributed by each Partner as of the date hereof is as set forth in
Exhibit A-1.
- -----------
2
<PAGE>
"Agreement" means this First Amended and Restated Agreement of Limited
---------
Partnership, as it may be amended, supplemented or restated from time to time.
"Articles of Incorporation" means the Articles of Incorporation or other
-------------------------
organizational document governing the General Partner, as amended or restated
from time to time.
"Assignee" means a Person to whom one or more Partnership Units have been
--------
transferred in a manner permitted under this Agreement, but who has not become a
Substituted Limited Partner, and who has the rights set forth in Section 11.4
hereof.
"Available Cash" means, with respect to any period for which such
--------------
calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may be) for
such period (without regard to adjustments resulting from allocations
described in Sections 1.A through 1.E of Exhibit C);
---------
(b) Depreciation and all other noncash charges deducted in determining
Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such amounts
are no longer necessary);
(d) the excess of proceeds from the sale, exchange, disposition, or
refinancing of Partnership property for such period over the gain
recognized from such sale, exchange, disposition, or refinancing during
such period (excluding Terminating Capital Transactions); and
(e) all other cash received by the Partnership for such period that
was not included in determining Net Income or Net Loss for such period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership during such
period;
(b) capital expenditures made by the Partnership during such period;
(c) investments made by the Partnership during such period in any
entity (including loans made thereto) to the extent that such investments
are not otherwise described in clause (ii)(a) or (ii)(b);
(d) all other expenditures and payments not deducted in determining
Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or Net Loss for such
period that was not received or disbursed by the Partnership during such
period;
3
<PAGE>
(f) the amount of any increase in reserves during such period which
the General Partner determines to be necessary or appropriate in its sole
and absolute discretion; and
(g) the amount of any working capital accounts and other cash or
similar balances which the General Partner determines to be necessary or
appropriate, in its sole and absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any cash
received or reductions in reserves, or take into account any disbursements made
or reserves established, after commencement of the dissolution and liquidation
of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
--------------------
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all
of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
---------
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
------------
which commercial banks in Boston, Massachusetts are authorized or required by
law to close.
"Capital Account" means the Capital Account maintained for a Partner
---------------
pursuant to Exhibit B hereof.
---------
"Capital Contribution" means, with respect to any Partner, any cash, cash
--------------------
equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1, 4.2, or 4.3 hereof.
"Carrying Value" means (i) with respect to a Contributed Property or
--------------
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Contributed Property or Adjusted
Property, as the case may be, charged to the Partners' Capital Accounts
following the contribution of or adjustment with respect to such Property; and
(ii) with respect to any other Partnership property, the adjusted basis of such
property for federal income tax purposes, all as of the time of determination.
The Carrying Value of any property shall be adjusted from time to time in
accordance with Exhibit B hereof, and to reflect changes, additions or other
---------
adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash per Partnership Unit equal to the
-----------
Value on the Valuation Date of the REIT Shares Amount.
"Certificate of Designations" means an amendment to this Agreement that
---------------------------
sets forth the designations, rights, powers, duties and preferences of holders
of any Partnership Interests issued pursuant to Section 4.2.A, which amendment
is in the form of a certificate signed by the General Partner and appended to
this Agreement. A Certificate of Designations is not the exclusive manner in
which such an amendment may be effected. The General Partner may adopt a
Certificate of Designations without the consent of the Limited Partners to the
extent permitted pursuant to Section 14.1.B hereof.
4
<PAGE>
"Certificate of Limited Partnership" means the Certificate of Limited
----------------------------------
Partnership relating to the Partnership filed in the office of the Massachusetts
Secretary of State, as amended from time to time in accordance with the terms
hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
----
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Common Units" means the Partnership Units issued to the Partners, which
------------
Partnership Units have the rights, preferences and privileges designated herein.
The number of Common Units issued to such Partners is set forth on Exhibit A-1
-----------
attached hereto.
"Company" means Property Capital Trust, Inc., a Maryland corporation.
-------
"Consent" means the consent or approval of a proposed action by a Partner
-------
given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset, in such form as
--------------------
may be permitted by the Act (but excluding cash), contributed or deemed
contributed to the Partnership (including deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Exhibit B hereof, such property shall no longer constitute a
---------
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
---------
Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that the Company
----------------- -------- ----
(i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a distribution to all holders of its outstanding REIT Shares in REIT
Shares; (ii) subdivides its outstanding REIT Shares; or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
(assuming for such purpose that such dividend, distribution, subdivision or
combination has occurred as of such time), and the denominator of which shall be
the actual number of REIT Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination. Any adjustment to the Conversion Factor shall
become effective immediately after the Effective Date of such event retroactive
to the record date, if any, for such event (provided, however, if a Notice of
-------- -------
Redemption is given prior to such a record date and the Specified Redemption
Date is after such a record date, then the adjustment to the Conversion Factor
shall, with respect to such redeeming Partner, be retroactive to the date of
such Notice of Redemption). It is intended that adjustments to the Conversion
Factor are to be made in order to avoid unintended dilution or anti-dilution as
a result of transactions in which REIT Shares are issued, redeemed or exchanged
without a corresponding issuance, redemption or exchange of Partnership Units.
If, prior to a Specified Redemption Date, Rights (other than Rights issued
pursuant to an employee benefit plan or other compensation arrangement) were
issued and have expired, and such Rights were issued with an exercise price
that, together with the purchase price for such Rights, was below fair market
value in relation to the security or other property to be acquired upon the
exercise of such Rights, and such Rights were issued to all holders of
outstanding REIT shares or the General Partner cannot in good faith represent
that the issuance of such Rights benefitted the Limited Partners, then the
Conversion Factor applicable upon a Notice of Redemption shall be equitably
adjusted in a manner
5
<PAGE>
consistent with antidilution provisions in warrants and other instruments in the
case of such a below market issuance or exercise price. A similar equitable
adjustment to protect the value of Partnership Units shall be made in all events
if any Rights issued under a "Shareholder Rights Plan" became exercisable and
expired prior to a Specified Redemption Date.
"Depreciation" means, for each taxable year, an amount equal to the federal
------------
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
-------- -------
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Effective Date" means [___________, 1999].
--------------
"General Partner" means the Company, in its capacity as the general partner
---------------
of the Partnership, or its successors as general partner of the Partnership.
"General Partner Interest" means a Partnership Interest held by the General
------------------------
Partner, in its capacity as general partner. A General Partner Interest may be
expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the internal
---
revenue laws of the United States.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
---------- -------------
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his or her Person or estate; (ii) as to
any corporation which is a Partner, the filing of a certificate of dissolution,
or its equivalent, for the corporation or the revocation of its charter; (iii)
as to any partnership which is a Partner, the dissolution and commencement of
winding up of the partnership; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this
definition, bankruptcy of a Partner shall be deemed to have occurred when (a)
the Partner commences a voluntary proceeding seeking liquidation, reorganization
or other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect; (b) the Partner is adjudged as bankrupt or insolvent, or a
final and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the Partner; (c)
the Partner executes and delivers a general assignment for the benefit of the
Partner's creditors; (d) the Partner files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof; (g) the appointment
without the Partner's consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within ninety (90) days of such
appointment; or (h) an
6
<PAGE>
appointment referred to in clause (g) which has been stayed is not vacated
within ninety (90) days after the expiration of any such stay.
"Indemnitee" means (i) any Person made a party to a proceeding by reason of
----------
(A) his status as the General Partner, or as a director, trustee, officer,
employee or shareholder (with respect to the affairs of such entity) of the
Partnership, the General Partner or a predecessor entity of the General Partner,
or (B) his or its liabilities, pursuant to a loan guarantee or otherwise, for
any indebtedness of the Partnership or any Subsidiary of the Partnership
(including, without limitation, any indebtedness which the Partnership or any
Subsidiary of the Partnership has assumed or taken assets subject to); (ii) each
present and former trustee, officer, employee or shareholder (in connection with
the affairs of Property Capital Trust, a Massachusetts business trust (the
"Trust")) of the Trust in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative (A)
arising out of or pertaining to the transactions contemplated by the Agreement
and Plan of Merger, dated as of June 18, 1998, as amended, between the Trust and
the Company (the "Trust Merger Agreement") or (B) otherwise with respect to any
acts or omissions occurring at or prior to the Effective Time (as defined in the
Trust Merger Agreement) for a period of six years after the Effective Date; and
(iii) such other Persons (including Affiliates of the General Partner or the
Partnership) as the General Partner may designate from time to time (whether
before or after the event giving rise to potential liability), in its sole and
absolute discretion.
"Limited Partner" means any Person (including the Company) named as a
---------------
Limited Partner in Exhibit A-1 attached hereto, as such Exhibit may be amended
-----------
from time to time, or any Substituted Limited Partner or Additional Limited
Partner, in such Person's capacity as a Limited Partner of the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
------------------------
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of Partnership Units.
"Limited Partner Recourse Debt Percentage" means with respect to certain of
----------------------------------------
the Limited Partners the percentage listed with respect to such Limited Partner
on the recourse debt level schedule attached hereto as Exhibit E.
"Liquidating Event" has the meaning set forth in Section 13.1 hereof.
-----------------
"Liquidator" has the meaning set forth in Section 13.2 hereof.
----------
"Minimum Rental Income" has the meaning set forth in Section 5.1.B hereof.
---------------------
"Modified Adjusted Capital Account Balance" means, with respect to any
-----------------------------------------
Partner, the Capital Account maintained for each Partner as of the end of each
Partnership taxable year (i) increased by any amounts which such Partner is
deemed to be obligated to restore pursuant to the penultimate sentences of
Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) decreased by the
items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-
1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
"Net Income" means, for any taxable period, the excess, if any, of the
----------
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable
7
<PAGE>
period. The items included in the calculation of Net Income shall be determined
in accordance with federal income tax accounting principles, subject to the
specific adjustments provided for in Exhibit B.
---------
"Net Loss" means, for any taxable period, the excess, if any, of the
--------
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
---------
"Nonrecourse Built-in Gain" means, with respect to any Contributed
-------------------------
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
---------
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"New Securities" has the meaning set forth in Section 4.2.B hereof.
--------------
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
----------------------
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
---------------------
1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in the
--------------------
form of Exhibit D to this Agreement.
---------
"Original Agreement" has the meaning set forth in the recitals hereof.
------------------
"Partner" means a General Partner or a Limited Partner, and "Partners"
------- --------
means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each Partner
--------------------
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
------------------------
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
------------------------------
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be
determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
-----------
pursuant to this Agreement, as it may be amended and/or restated, and any
successor thereto.
"Partnership Interest" means an ownership interest in the Partnership
--------------------
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all
8
<PAGE>
obligations of such Person to comply with the terms and provisions of this
Agreement. A Partnership Interest may be expressed as a number of Partnership
Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
------------------------
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in a Partnership Minimum Gain, for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Record Date" means the record date established by the General
-----------------------
Partner for the distribution of Available Cash pursuant to Section 5.1 hereof,
which record date shall be the same as the record date established by the
Company for a distribution to its shareholders of some of all of its portion of
such distribution.
"Partnership Unit" or "Unit" means a fractional, undivided share of the
---------------- ----
Partnership Interests of all Partners issued pursuant to Sections 4.1, 4.2 and
4.3 (and includes any series or class of Preferred Units). The number of
Partnership Units outstanding and the Percentage Interest in the Partnership
represented by such Units are set forth in Exhibit A attached hereto, as such
---------
Exhibit may be amended from time to time. The ownership of Partnership Units
shall be evidenced by such form of certificate for units as the General Partner
adopts from time to time unless the General Partner determines that the
Partnership Units shall be uncertificated securities.
"Partnership Year" means the fiscal year of the Partnership, which shall be
----------------
the calendar year.
"Percentage Interest" means, as to a Partner, its percentage interest in
-------------------
the Partnership as determined by dividing the Partnership Units (other than the
Series A Preferred Units and Series B Preferred Units) owned by such Partner by
the total number of Partnership Units (other than the Series A Preferred Units
and Series B Preferred Units) then outstanding and as specified in Exhibit A-1
-----------
attached hereto, as such Exhibit may be amended from time to time.
"Person" means an individual or a corporation, partnership, limited
------
liability company, trust, unincorporated organization, association or other
entity.
"PCT LP" has the meaning set forth in the recitals hereof.
------
"PCT LP Merger" has the meaning set forth in the recitals hereof.
-------------
"Preferred Unit" means a Partnership Unit which is designated as a
--------------
"Preferred Unit" (or as a particular class or series of Preferred Units) and
which has the rights, preferences and other privileges designated herein (or in
the Certificate of Designations for such class of Preferred Units) in respect of
a Preferred Unitholder. The allocation of Preferred Units, if any, among the
Partners shall be set forth on Exhibit A-1, as may be amended from time to time.
-----------
"Preferred Unitholder" means a Limited Partner that holds Preferred Units
--------------------
(of any class or series).
"Recapture Income" means any gain recognized by the Partnership upon the
----------------
disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
9
<PAGE>
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
-----------------
"Redemption Right" shall have the meaning set forth in Section 8.6 hereof.
----------------
"Regulations" means the Income Tax Regulations promulgated under the Code,
-----------
as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the Code.
----
"REIT Share" shall mean a share of common stock, par value $.01 per share,
----------
of the Company.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
------------------
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor in effect on the date of receipt by
the General Partner of a Notice of Redemption, provided that in the event the
-------- ----
Company issues to all holders of REIT Shares rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to subscribe
for or purchase REIT Shares, or any other securities or property (collectively,
"Rights"), and the Rights have not expired at the Specified Redemption Date,
then the REIT Shares Amount shall also include the Rights that were issuable to
a holder of the REIT Shares Amount of REIT Shares on the applicable record date
relating to the issuance of such Rights.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
------------- -------------
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
---------
Disparities.
"Rights" shall have the meaning set forth in the definition of "REIT Shares
------
Amount."
"704(c) Value" of any Contributed Property means the fair market value of
------------
such property or other consideration at the time of contribution, as determined
by the General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the 704(c) Value of any property deemed
-------- -------
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof,
--------- ---------
the General Partner shall, in its sole and absolute discretion, use such method
as it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.
"Series A Preferred Units" means the Partnership Units issued to certain of
------------------------
the Limited Partners on the Effective Date, which Partnership Units have the
rights, preferences and privileges designated herein. The number of Series A
Preferred Units issued to such Limited Partners is set forth on Exhibit A-1
-----------
attached hereto.
"Series B Preferred Units" means the Partnership Units issued to certain of
------------------------
the Limited Partners on the Effective Date,, which Partnership Units have the
rights, preferences and privileges designated herein. The number of Series B
Preferred Units issued to such Limited Partners is set forth on Exhibit A-1
-----------
attached hereto.
10
<PAGE>
"Specified Redemption Date" means the tenth (10th) Business Day after
------------------------- ----
receipt by the Company of a Notice of Redemption; provided that no Specified
-------- ----
Redemption Date shall occur before that date that is twelve (12) months after
the Effective Date, provided further that if the Company combines its
-------- -------
outstanding REIT Shares, no Specified Redemption Date shall occur after the
record date of such combination of REIT Shares and prior to the effective date
of such combination.
"Subsidiary" means, with respect to any Person, any corporation,
----------
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities; or (ii) the outstanding equity interests, is owned,
directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
---------------------------
Partner to the Partnership pursuant to Section 11.3 hereof.
"Terminating Capital Transaction" means any sale or other disposition of
-------------------------------
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property means,
---------------
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under Exhibit B hereof) as of such date;
---------
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to Exhibit B hereof) as of such date.
---------
"Unrealized Loss" attributable to any item of Partnership property means,
---------------
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B
---------
hereof) as of such date; over (ii) the fair market value of such property (as
determined under Exhibit B hereof) as of such date.
---------
"Valuation Date" means the date of receipt by the General Partner of a
--------------
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a REIT Share, the average of the daily
-----
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are listed or admitted to trading on any securities exchange or the
American Stock Exchange, the closing price on such day, or if no such sale takes
place on such day, the average of the closing bid and asked prices on such day;
(ii) if the REIT Shares are not listed or admitted to trading on any securities
exchange or the American Stock Exchange, the last reported sale price on such
day or, if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reliable quotation source designated
by the General Partner; or (iii) if the REIT Shares are not listed or admitted
to trading on any securities exchange or the American Stock Exchange and no such
last reported sale price or closing bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reliable quotation source designated by the General Partner, or if there
shall be no bid and asked prices on such day, the average of the high bid and
low asked prices, as so reported, on the most recent day (not more than ten (10)
days prior to the date in question) for which prices have been so reported;
provided that if there are no bid and asked prices reported during the ten (10)
- -------- ----
days prior to the date in question, the Value of the REIT Shares shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate. In the event the REIT Shares Amount includes Rights, then the
Value of such
11
<PAGE>
Rights shall be determined by the General Partner acting in good faith on the
basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate, provided that the Value of any rights issued
-------- ----
pursuant to a "Shareholder Rights Plan" shall be deemed to have no value unless
a "triggering event" shall have occurred (i.e., if the Rights issued pursuant
----
thereto are no longer "attached" to the REIT Shares and are able to trade
independently).
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Formation
---------
The Partnership is a limited partnership organized pursuant to the
provisions of the Act. The Partners hereby agree to continue the Partnership
upon the terms and conditions set forth in this Agreement. Except as expressly
provided herein to the contrary, the rights and obligations of the Partners and
the administration and termination of the Partnership shall be governed by the
Act. The Partnership Interest of each Partner shall be personal property for
all purposes.
Section 2.2 Name
----
The name of the Partnership is Property Capital Trust Limited Partnership.
The Partnership's business may be conducted under any other name or names deemed
advisable by the General Partner, including the name of the General Partner or
any Affiliate thereof. The words "Limited Partnership," "L.P.," "Ltd." or
similar words or letters shall be included in the Partnership's name where
necessary for the purposes of complying with the laws of any jurisdiction that
so requires. The General Partner in its sole and absolute discretion may change
the name of the Partnership at any time and from time to time and shall notify
the Limited Partners of such change in the next regular communication to the
Limited Partners.
Section 2.3 Principal Office
----------------
The principal office of the Partnership shall be 177 Milk Street, Boston,
Massachusetts 02109, or such other place as the General Partner may from time to
time designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the Commonwealth of
Massachusetts as the General Partner deems advisable.
Section 2.4 Power of Attorney
-----------------
A. Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and
other instruments (including, without limitation, this Agreement
and the Certificate of Limited Partnership and all amendments or
restatements thereof) that the General Partner or the Liquidator
deems appropriate or necessary to form, qualify or continue the
existence or
12
<PAGE>
qualification of the Partnership as a limited partnership (or a
partnership in which the Limited Partners have limited
liability) in the Commonwealth of Massachusetts and in all other
jurisdictions in which the Partnership may or plans to conduct
business or own property; (b) all instruments that the General
Partner deems appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement in
accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or the
Liquidator deems appropriate or necessary to reflect the
dissolution and liquidation of the Partnership pursuant to the
terms of this Agreement, including, without limitation, a
certificate of cancellation; (d) all instruments relating to the
admission, withdrawal, removal or substitution of any Partner
pursuant to, or other events described in, Article 11, 12 or 13
hereof or the Capital Contribution of any Partner; and (e) all
certificates, documents and other instruments relating to the
determination of the rights, preferences and privileges of
Partnership Interests; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of
the General Partner or any Liquidator, to make, evidence, give,
confirm or ratify any vote, consent, approval, agreement or
other action which is made or given by the Partners hereunder or
is consistent with the terms of this Agreement or appropriate or
necessary, in the sole discretion of the General Partner or any
Liquidator, to effectuate the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
or any Liquidator to amend this Agreement except in accordance with Article 14
hereof or as may be otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this Agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
13
<PAGE>
Section 2.5 Term
----
The term of the Partnership commenced on September 27, 1984, the date on
which the Certificate of Limited Partnership was filed in the office of the
Secretary of State of the Commonwealth of Massachusetts, and shall continue
until December 31, 2099, unless the Partnership is dissolved sooner pursuant to
the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
--------------------
The purpose and nature of the business to be conducted by the Partnership
is (i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act; provided, however, that such business
-------- -------
shall be limited to and conducted in such a manner as to permit the Company at
all times to be classified as a REIT, unless the Company ceases to qualify as a
REIT for reasons other than the conduct of the business of the Partnership; (ii)
to enter into any partnership, joint venture, limited liability company or other
similar arrangement to engage in any of the foregoing or to own interests in any
entity engaged, directly or indirectly, in any of the foregoing; and (iii) to do
anything necessary or incidental to the foregoing. In connection with the
foregoing, and without limiting the Company's right, in its sole discretion, to
cease qualifying as a REIT, the Partners acknowledge the Company's current
status as a REIT inures to the benefit of all of the Partners and not solely the
General Partner. The General Partner shall also be empowered to do any and all
acts and things necessary or prudent to ensure that the Partnership will not be
classified as a "publicly traded partnership" for purposes of Section 7704 of
the Code, including but not limited to imposing restrictions on transfers and
restrictions on redemptions.
Section 3.2 Powers
------
The Partnership is empowered to do any and all acts and things necessary,
appropriate, proper, advisable, incidental to or convenient for the furtherance
and accomplishment of the purposes and business described herein and for the
protection and benefit of the Partnership, including, without limitation, full
power and authority, directly or through its ownership interest in other
entities, to enter into, perform and carry out contracts of any kind, borrow
money and issue evidences of indebtedness whether or not secured by mortgage,
deed of trust, pledge or other lien, acquire, own, manage, improve and develop
real property, and lease, sell, transfer and dispose of real property; provided,
--------
however, that the Partnership shall not take, or refrain from taking, any action
- --------
which, in the judgment of the General Partner, in its sole and absolute
discretion, (i) could adversely affect the ability of the Company to continue to
qualify as a REIT; (ii) could subject the Company to any additional taxes under
Section 857 or Section 4981 of the Code; or (iii) could violate any law or
regulation of any governmental body or agency having jurisdiction over the
Company or its securities, unless such action (or inaction) shall have been
specifically consented to by the General Partner in writing.
14
<PAGE>
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
-------------------------------------
A. Initial Capital Contributions. The Company, as General Partner and as
-----------------------------
a Limited Partner, and the other Persons listed on Exhibit A-1 made Capital
-----------
Contributions to the Partnership as set forth therein and their initial Capital
Account balances are as set forth in Exhibit A-2. The General Partner completed
-----------
Exhibit A-1 to reflect the Capital Contributions made by each Partner, the
- -----------
Partnership Units assigned to each Partner and the Percentage Interest in the
Partnership represented by such Partnership Units.
B. General Partnership Interest. A number of Partnership Units held by
----------------------------
the Company equal to one percent (1%) of all outstanding Partnership Units shall
be deemed to be the General Partner Partnership Units and shall be the General
Partnership Interest. All other Partnership Units held by the Company shall be
deemed to be Limited Partnership Interests and shall be held by the General
Partner in its capacity as a Limited Partner in the Partnership.
C. Capital Contributions By Merger. To the extent the Partnership
-------------------------------
acquires any property by the merger of any other Person into the Partnership,
Persons who receive Partnership Interests in exchange for their interests in the
Person merging into the Partnership shall become Partners and shall be deemed to
have made Capital Contributions as provided in the applicable merger agreement
and as set forth in Exhibit A-1, as amended to reflect such deemed Capital
-----------
Contributions.
D. No Obligation to Make Additional Capital Contributions. Each Partner
------------------------------------------------------
shall own the number of Partnership Units set forth for such Partner in Exhibit
-------
A-1 and shall have a Percentage Interest in the Partnership as set forth in
- ---
Exhibit A-1, which Percentage Interest shall be adjusted in Exhibit A-1 from
- ----------- -----------
time to time by the General Partner to the extent necessary to reflect
accurately redemptions, additional Capital Contributions, the issuance of
additional Partnership Units (pursuant to any merger or otherwise), or similar
events having an effect on any Partner's Percentage Interest. The number of
Partnership Units held by the General Partner, in its capacity as general
partner, (equal to one percent (1%) of all outstanding Partnership Units from
time to time) shall be deemed to be the General Partner Interest. Except as
provided in Sections 4.2, 10.5 or elsewhere in this Agreement, the Partners
shall have no obligation to make any additional Capital Contributions or loans
to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests
---------------------------------------------
A. The General Partner is hereby authorized to cause the Partnership from
time to time to issue to the Partners (including the General Partner and its
Affiliates) or other Persons (including, without limitation, in connection with
the contribution of property to the Partnership) additional Partnership Units or
other Partnership Interests in one or more classes, or one or more series of any
of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to the Limited Partner Interests issued on the
Effective Date, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Massachusetts law, including, without
limitation, (i) the allocations of items of Partnership income, gain, loss,
deduction and credit to each such class or series of Partnership Interests; (ii)
the right of each such class or series of Partnership Interests to share in
Partnership distributions; and (iii) the rights of each such class or series of
15
<PAGE>
Partnership Interests upon dissolution and liquidation of the Partnership;
provided that no such additional Partnership Units or other Partnership
- -------- ----
Interests shall be issued to the General Partner, unless either (a)(1) the
additional Partnership Interests are issued in connection with the grant, award
or issuance of REIT Shares or other equity interests by the Company, which REIT
shares or other equity interests have designations, preferences and other rights
such that the economic interests attributable to such REIT shares or other
equity interests are substantially similar to the designations, preferences and
other rights of the additional Partnership Interests issued to the General
Partner in accordance with this Section 4.2A, and (2) the Company shall make a
Capital Contribution to the Partnership in an amount equal to the proceeds
raised in connection with such issuance, or (b) the additional Partnership
Interests are issued to all Partners in proportion to their respective
Percentage Interests. In addition, the Company may acquire Partnership Units
from other Partners pursuant to this Agreement. In the event that the
Partnership issues Partnership Interests pursuant to this Section 4.2A, the
General Partner shall make such revisions to this Agreement (without any
requirement of receiving approval of the Limited Partners) including but not
limited to the revisions described in Section 5.4, Section 6.1 and Section 8.6
hereof, as it deems necessary to reflect the issuance of such additional
Partnership Interests and the special rights, powers and duties associated
therewith. Unless specifically set forth otherwise by the General Partner, any
Partnership Interest issued after the Effective Date shall have the same rights,
powers and duties as the Partnership Interests issued on the Effective Date.
B. From and after the date hereof, the Company shall not issue any
additional REIT Shares (other than REIT Shares issued pursuant to Section 8.6
hereof), or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares (collectively "New
Securities") other than to all holders of REIT Shares unless (i) the General
Partner shall cause the Partnership to issue to the Company, Partnership
Interests or rights, options, warrants or convertible or exchangeable securities
of the Partnership having designations, preferences and other rights, all such
that the economic interests are substantially similar to those of the New
Securities; and (ii) the Company contributes to the Partnership the proceeds
from the issuance of such New Securities and from the exercise of rights
contained in such New Securities. Without limiting the foregoing, the Company
is expressly authorized to issue New Securities for no tangible value or for
less than fair market value, and the General Partner is expressly authorized to
cause the Partnership to issue to the Company corresponding Partnership
Interests, so long as (x) the General Partner concludes in good faith that such
issuance is in the interests of the Company and the Partnership (for example,
and not by way of limitation, the issuance of REIT Shares and corresponding
Units pursuant to an employee stock purchase plan providing for employee grants
or purchases of REIT Shares or employee stock options that have an exercise
price that is less than the fair market value of the REIT Shares, either at the
time of issuance or at the time of exercise); and (y) the Company contributes
all proceeds, if any, from such issuance and exercise to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares
---------------------------------------------------
In connection with the issuance of New Securities pursuant to Section 4.2
hereof, the General Partner shall contribute to the Partnership any proceeds (or
a portion thereof) raised in connection with such issuance; provided that if the
-------- ----
proceeds actually received by the General Partner are less than the gross
proceeds of such issuance as a result of any underwriter's discount or other
expenses paid or incurred in connection with such issuance, then the General
Partner shall be deemed to have made a Capital Contribution to the Partnership
in the amount equal to the sum of the net proceeds of such issuance plus the
amount of such underwriter's discount and other expenses paid by the General
Partner (which discount and expense shall be treated as an expense for the
benefit of the Partnership for purposes of Section 7.4 hereof).
16
<PAGE>
In the case of employee acquisitions of New Securities at a discount from fair
market value or for no value in connection with a grant of New Securities, the
amount of such discount representing compensation to the employee, as determined
by the General Partner, shall be treated as an expense of the issuance of such
New Securities.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
-------------------------------------------------
A. The General Partner shall distribute at least quarterly an amount
equal to 100% of Available Cash generated by the Partnership during such quarter
or shorter period to the holders of Partnership Units who are Partners on the
Partnership Record Date with respect to such quarter or shorter period
(i) first, to the holders of Series A Preferred Units (in proportion
to the number of Series A Preferred Units owned by each such holder) an
amount that in the aggregate equals $36,636 for such quarter or shorter
period;
(ii) second, to the holders of the Series B Preferred Units (in
proportion to the number of Series B Preferred Units owned by each such
holder) an amount that in the aggregate equals $35,864 for such quarter or
shorter period; and
(iii) third, to the holders of Common Units in accordance with their
respective Percentage Interests on such Partnership Record Date;
provided, that in no event may a Partner receive a distribution of
-------- ----
Available Cash with respect to a Partnership Unit if such Partner is
entitled to receive a distribution out of such Available Cash with respect
to a REIT Share for which such Partnership Unit has been redeemed or
exchanged, and further provided that no distributions shall be made
------- --------
pursuant to clause (iii) above unless all cumulative distributions with
respect to the Series A Preferred Units and the Series B Preferred Units
for all past distribution periods and the then current distribution period
have been or contemporaneously are (x) paid in full or (y) declared and a
sum sufficient for the full payment thereof is set apart for such payment.
The General Partner shall take such reasonable efforts, as determined by it
in its sole and absolute discretion and consistent with the Company's
qualification as a REIT, to distribute Available Cash to (a) the Limited
Partners so as to preclude any such distribution or portion thereof from
being treated as part of a sale of property to the Partnership by a Limited
Partner under Section 707 of the Code or the Regulations thereunder;
provided that the General Partner and the Partnership shall not have
-------- ----
liability to a Limited Partner under any circumstances as a result of any
distribution to a Limited Partner being so treated and (b) satisfy the
requirements for qualifying as a REIT under the Code.
B. Notwithstanding anything to the contrary contained herein, the holders
of Series A Preferred Units and the holders of Series B Preferred Units shall
only be entitled to the distributions set forth in Section 5.1A(i) and Section
5.1A(ii) above, respectively, for so long as the rental income from the property
located at 51 New York Avenue, Framingham, Massachusetts is equal to or exceeds
$89,250 (the
17
<PAGE>
"Minimum Rental Income") during any quarter or shorter period. In the event that
such property does not generate the Minimum Rental Income in any quarter or
shorter period, then the distributions required to be made pursuant to Section
5.1A(i) and Section 5.1A(ii) above to the holders of Series A Preferred Units
and the holders of Series B Preferred Units, respectively, shall be decreased in
proportion to the amount by which the amount of rental income actually received
during such quarter or shorter period is less than the Minimum Rental Income.
Section 5.2 Amounts Withheld
----------------
All amounts withheld pursuant to the Code or any provisions of any state or
local tax law and Section 10.5 hereof with respect to any allocation, payment or
distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Section 5.1 hereof for all
purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation
------------------------------
Proceeds from a Terminating Capital Transaction and any other cash received
or reductions in reserves made after commencement of the liquidation of the
Partnership shall be distributed to the Partners in accordance with Section 13.2
hereof.
Section 5.4 Revisions to Reflect Issuance of Additional Partnership
-------------------------------------------------------
Interests
- ---------
In the event that the Partnership issues additional Partnership Interests
to the General Partner or any Additional Limited Partner pursuant to Article 4
hereof, the General Partner shall make such revisions to this Article 5 as it
deems necessary to reflect the issuance of such additional Partnership Interests
and any special rights, duties or powers with respect thereto.
18
<PAGE>
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
----------------------------------------
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B attached hereto)
---------
shall be allocated among the Partners in each taxable year (or portion thereof)
as provided below.
A. Subject to (iii) below, and after reduction for the allocations
described therein, Net Income shall be allocated
(i) first, to the Partners in the same ratio and reverse order as
Net Loss was allocated to such Partners pursuant to Section 6.1B(ii) and
(iii) hereof for all fiscal years until the aggregate amount of Net Losses
previously allocated to the Partners pursuant to such provisions of Section
6.1B hereof equal the aggregate amount of Net Income allocated to such
Partners pursuant to this clause (i) of Section 6.1A; and
(ii) thereafter, Net Income shall be allocated to the Partners in
accordance with their respective Percentage Interests.
(iii) Notwithstanding anything to the contrary in 6.1A(i) and (ii)
above, items of gross income shall be allocated
(a) first to the holders of Series A Preferred Units, pro rata,
in proportion to the number of Series A Preferred Units owned by each,
until the aggregate amount of income allocated pursuant to this clause (a)
for all fiscal periods equals the aggregate amount distributed to the
holders of Series A Preferred Units pursuant to clause (i) of Section 5.1A
hereof for all fiscal periods, and
(b) second, to the holders of Series B Preferred Units, pro
rata, in proportion to the number of Series B Preferred Units owned by
each, until the aggregate amount of income allocated pursuant to this
clause (b) for all fiscal periods equals the aggregate amount distributed
to the holders of Series B Preferred Units pursuant to clause (ii) of
Section 5.1A hereof for all fiscal periods.
B. After giving effect to the special allocations set forth in Section 1
of Exhibit C attached hereto, Net Losses shall be allocated
---------
(i) first, to the Partners in the same ratio and reverse order as
Net Income was allocated to such Partners pursuant to Section 6.1A(ii)
hereof for all fiscal years until the aggregate amount of Net Income
previously allocated to such Partners pursuant to Section 6.1A(ii) hereof
equals the aggregate amount of Net Loss allocated to such Partners pursuant
to this Section 6.1B(i) hereof;
(ii) second, to the Partners, pro rata, in proportion to their
Adjusted Capital Account
19
<PAGE>
balance until their Adjusted Capital Account balance has been reduced to
zero, provided however, for purposes of this Section 6.1B(ii) hereof each
Partner's Adjusted Capital Account balance shall not include the portion of
such Capital Account attributable to the Series A Preferred Units or the
Series B Preferred Units;
(iii) third, to the holders of the Series B Preferred Units, pro
rata, in proportion to their portion of their Capital Account balance
attributable to the Series B Preferred Units, until the aggregate amount of
Net Loss allocated to such holders pursuant to this Section 6.1B(iii)
hereof has reduced such portion of their Capital Account balance to zero;
(iv) fourth, to the holders of the Series A Preferred Units, pro
rata, in proportion to their portion of their Capital Account balance
attributable to the Series A Preferred Units, until the aggregate amount of
Net Losses allocated to such holders pursuant to this Section 6.1B(iv)
hereof has reduced such portion of their Capital Account balance to zero;
(v) fifth, to the Partners in accordance with their respective
Percentage Interests; provided that Net Losses shall not be allocated to
any Limited Partner to the extent such allocation would cause such Limited
Partner to have an Adjusted Capital Account Deficit; and
(vi) thereafter, all Net Losses in excess of the limitations set
forth in this Section 6.1B hereof shall be allocated to the General
Partner.
C. For purposes of Regulations Section 1.752-3(a), the Partners agree
that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective interests in Partnership profits, as determined by the General
Partner in its reasonable discretion after taking into account all relevant
facts and circumstances.
D. Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall to the extent possible, after taking
into account other required allocations of gain pursuant to Exhibit C, be
---------
characterized as Recapture Income in the same proportions and to the same extent
as such Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
----------
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs of the Partnership are and shall
be exclusively vested in the General Partner, and no Limited Partner shall have
any right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3 hereof, shall have
full power and authority to do
20
<PAGE>
all things deemed necessary or desirable by it to conduct the business of the
Partnership, to exercise all powers set forth in Section 3.2 hereof and to
effectuate the purposes set forth in Section 3.1 hereof, including, without
limitation:
(1) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans and
borrowing money to permit the Partnership to make distributions
to its Partners in such amounts as will permit the Company (so
long as the Company qualifies as a REIT) to avoid the payment of
any federal income tax (including, for this purpose, any excise
tax pursuant to Section 4981 of the Code) and to make
distributions to its shareholders in amounts sufficient to permit
the Company to maintain REIT status), the assumption or guarantee
of, or other contracting for, indebtedness and other liabilities,
the issuance of evidence of indebtedness (including the securing
of the same by deed, mortgage, deed of trust or other lien or
encumbrance on the Partnership's assets) and the incurring of any
obligations it deems necessary for the conduct of the activities
of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies
having jurisdiction over the business or assets of the
Partnership, the registration of any class of securities of the
Partnership under the Securities Exchange Act of 1934, as
amended, and the listing of any debt securities of the
Partnership on any exchange;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership
(including the exercise or grant of any conversion, option,
privilege, or subscription right or other right available in
connection with any assets at any time held by the Partnership)
or the merger or other combination of the Partnership with or
into another entity (all of the foregoing subject to any prior
approval only to the extent required by Section 7.3 hereof);
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the
terms of this Agreement and on any terms it sees fit, including,
without limitation, the financing of the conduct of the
operations of the Company, the Partnership or any of the
Partnership's Subsidiaries, the lending of funds to other Persons
(including, without limitation, the Subsidiaries of the
Partnership and/or the Company) and the repayment of obligations
of the Partnership and its Subsidiaries and any other Person in
which it has an equity investment, and the making of capital
contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property or
improvements owned by the Partnership or any Subsidiary of the
Partnership;
(6) the negotiation, execution, and performance of any contracts,
conveyances or other instruments that the General Partner
considers useful or necessary to the conduct of
21
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the Partnership's operations or the implementation of the General
Partner's powers under this Agreement, including contracting with
contractors, developers, consultants, accountants, legal counsel,
other professional advisors and other agents and the payment of
their expenses and compensation out of the Partnership's assets;
(7) the distribution of Partnership cash or other Partnership assets
in accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other
assets of the Partnership;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) the establishment of one or more divisions of the Partnership,
the selection and dismissal of employees of the Partnership
(including, without limitation, employees having titles such as
"president," "vice president," "secretary" and "treasurer" of the
Partnership), and agents, outside attorneys, accountants,
consultants and contractors of the Partnership, and the
determination of their compensation and other terms of employment
or hiring;
(11) the maintenance of such insurance for the benefit of the
Partnership, the Partner and directors and officers thereof as it
deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general
partnerships, joint ventures or other relationships that it deems
desirable (including, without limitation, the acquisition of
interests in, and the contributions of property to, its
Subsidiaries and any other Person in which it has an equity
investment from time to time);
(13) the control of any matters affecting the rights and obligations
of the Partnership, including the settlement, compromise,
submission to arbitration or any other form of dispute
resolution, or abandonment of, any claim, cause of action,
liability, debt or damages, due or owing to or from the
Partnership, the commencement or defense of suits, legal
proceedings, administrative proceedings, arbitration or other
forms of dispute resolution, and the representation of the
Partnership in all suits or legal proceedings, administrative
proceedings, arbitrations or other forms of dispute resolution,
the incurring of legal expense, and the indemnification of any
Person against liabilities and contingencies to the extent
permitted by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries
or any other Person (including, without limitation, the
contribution or loan of funds by the Partnership to such
Persons);
(15) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of
valuation as the General Partner may adopt;
22
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(16) the exercise, directly or indirectly, through any attorney-in-
fact acting under a general or limited power of attorney, of any
right, including the right to vote, appurtenant to any asset or
investment held by the Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with
any Subsidiary of the Partnership or any other Person in which
the Partnership has a direct or indirect interest, or jointly
with any such Subsidiary or other Person;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or
other arrangements with such Person;
(19) the making, execution and delivery of any and all deeds, leases,
notes, mortgages, deeds of trust, security agreements,
conveyances, contracts, guarantees, warranties, indemnities,
waivers, releases or legal instruments or agreements in writing
necessary or appropriate, in the judgment of the General Partner,
for the accomplishment of any of the powers of the General
Partner enumerated in this Agreement; and
(20) the issuance of additional Partnership Units, as appropriate, in
connection with Capital Contributions by Additional Limited
Partners and additional Capital Contributions by Partners
pursuant to Article 4 hereof.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement
(except as provided in Section 7.3 hereof, the Act or any applicable law, rule
or regulation, to the fullest extent permitted under the Act or other applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
D. In exercising its authority under this Agreement, the General Partner
may, but shall be under no obligation to, take into account the tax consequences
to any Partner of any action taken by it. The General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances, as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under this Agreement and in accordance with the terms
of Section 7.3 hereof. The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership, the Company and the
Company's stockholders collectively.
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Section 7.2 Certificate of Limited Partnership
----------------------------------
The General Partner has previously filed the Certificate of Limited
Partnership with the Secretary of State of the Commonwealth of Massachusetts as
required by the Act. The General Partner shall use all reasonable efforts to
cause to be filed such other certificates or documents as may be reasonable and
necessary or appropriate for the formation, continuation, qualification and
operation of a limited partnership (or a partnership in which the limited
partners have limited liability) in the Commonwealth of Massachusetts and any
other state, or the District of Columbia, in which the Partnership may elect to
do business or own property. To the extent that such action is determined by
the General Partner to be reasonable and necessary or appropriate, the General
Partner shall file amendments to and restatements of the Certificate of Limited
Partnership and do all of the things to maintain the Partnership as a limited
partnership (or a partnership in which the limited partners have limited
liability) under the laws of the Commonwealth of Massachusetts and each other
state, or the District of Columbia, in which the Partnership may elect to do
business or own property. Subject to the terms of Section 8.5A(4) hereof, the
General Partner shall not be required, before or after filing, to deliver or
mail a copy of the Certificate of Limited Partnership or any amendment thereto
to any Limited Partner.
Section 7.3 Restrictions on General Partner Authority. The General
-----------------------------------------
Partner may not take any action in contravention of an express prohibition or
limitation of this Agreement without the written Consent of Limited Partners
holding a majority of the Percentage Interests of the Limited Partners
(including Limited Partner Interests held by the Company), or such other
percentage of the Limited Partners as may be specifically provided for under a
provision of this Agreement.
Section 7.4 Reimbursement of the General Partner and the Company; DRIP's
------------------------------------------------------------
and Repurchase Programs
-----------------------
A. Except as provided in this Section 7.4 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. The General Partner shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership (including, without limitation, (i) expenses
relating to the ownership of interests in and operation of the Partnership, (ii)
compensation, if any, of the Company's officers and employees including, without
limitation, payments under the General Partner's Stock Incentive Plans that
provides for stock units, or other phantom stock, pursuant to which employees of
the General Partner will receive payments based upon dividends on or the value
of REIT Shares, (iii) director fees and expenses and (iv) all costs and expenses
of being a public company, including costs of filings with the Securities and
Exchange Commission, reports and other distributions to its stockholders);
provided that the amount of any such reimbursement shall be reduced by any
- -------- ----
interest earned by the General Partner with respect to bank accounts or other
instruments or accounts held by it on behalf of the Partnership. The Partners
acknowledge that all such expenses of the General Partner are deemed to be for
the benefit of the Partnership. Such reimbursement shall be in addition to any
reimbursement made as a result of indemnification pursuant to Section 7.7
hereof.
C. As set forth in Section 4.3 hereof, the Company shall be treated as
having made a Capital Contribution in the amount of all expenses that it incurs
relating to the Company's offering of New
24
<PAGE>
Securities.
D. In the event that the Company shall elect to purchase from its
shareholders REIT Shares for the purpose of delivering such REIT Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
Company, any employee stock purchase plan adopted by the Company, or any similar
obligation or arrangement undertaken by the Company in the future or for the
purpose of retiring such REIT Shares, the purchase price paid by the Company for
such REIT Shares and any other expenses incurred by the Company in connection
with such purchase shall be considered expenses of the Partnership and shall be
advanced to the Company or reimbursed to the Company, subject to the condition
that: (i) if such REIT Shares subsequently are sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such REIT
Shares (which sales proceeds shall include the amount of dividends reinvested
under any dividend reinvestment or similar program provided that a transfer of
REIT Shares for Units pursuant to Section 8.6 hereof would not be considered a
sale for such purposes); and (ii) if such REIT Shares are not retransferred by
the Company within thirty (30) days after the purchase thereof, or the Company
otherwise determines not to retransfer such REIT Shares, the Company, as General
Partner, shall cause the Partnership to redeem a number of Partnership Units
held by the Company, as a Limited Partner, equal to the product obtained by
dividing the number of such REIT Shares by the Conversion Factor (in which case
such advancement or reimbursement of expenses shall be treated as having been
made as a distribution in redemption of such number of Partnership Units held by
the Company).
Section 7.5 Outside Activities of the General Partner
-----------------------------------------
The General Partner shall not directly or indirectly enter into or conduct
any business other than in connection with the ownership, acquisition and
disposition of Partnership Interests and the management of the business of the
Partnership, and such activities as are incidental thereto. The General Partner
and any Affiliates of the General Partner may acquire Limited Partner Interests
and shall be entitled to exercise all rights of a Limited Partner relating to
such Limited Partner Interests.
Section 7.6 Contracts with Affiliates
-------------------------
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.5 hereof, the Partnership may transfer
assets to joint ventures, other partnerships, corporations or other business
entities in which it is or thereby becomes a participant upon such terms and
subject to such conditions consistent with this Agreement and applicable law as
the General Partner, in its sole and absolute discretion, believes are
advisable.
C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase any property from, the Partnership, directly or indirectly,
except pursuant to transactions that are determined by the General Partner in
good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion and without
the approval of the
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Limited Partners, may propose and adopt, on behalf of the Partnership, employee
benefit plans, stock option plans, and similar plans funded by the Partnership
for the benefit of employees of the General Partner, the Partnership,
Subsidiaries of the Partnership or any Affiliate of any of them in respect of
services performed, directly or indirectly, for the benefit of the Partnership,
the General Partner, or any Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Partnership
and the General Partner, on such terms as the General Partner, in its sole and
absolute discretion, believes are advisable.
Section 7.7 Indemnification
---------------
A. To the fullest extent permitted by Massachusetts law, the Partnership
shall indemnify each Indemnitee from and against any and all losses, claims,
damages, liabilities, joint or several, expenses (including, without limitation,
attorneys fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the Company as set forth in
this Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise, unless it is established that: (i) the act or
omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty; (ii) the Indemnitee actually received an improper
personal benefit in money, property or services; or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. Without limitation, the foregoing indemnity shall
extend to any liability of any Indemnitee, pursuant to a loan guaranty (except a
guaranty by a limited partner of nonrecourse indebtedness of the Partnership or
as otherwise provided in any such loan guaranty) or otherwise for any
indebtedness of the Partnership or any Subsidiary of the Partnership (including
without limitation, any indebtedness which the Partnership or any Subsidiary of
the Partnership has assumed or taken subject to), and the General Partner is
hereby authorized and empowered, on behalf of the Partnership, to enter into one
or more indemnity agreements consistent with the provisions of this Section 7.7
in favor of any Indemnitee having or potentially having liability for any such
indebtedness. The termination of any proceeding by conviction of an Indemnitee
or upon a plea of nolo contendere or its equivalent by an Indemnitee, or an
entry of an order of probation against an Indemnitee prior to judgment, creates
a rebuttable presumption that such Indemnitee acted in a manner contrary to that
specified in this Section 7.7A. Any indemnification pursuant to this Section
7.7 shall be made only out of the assets of the Partnership, and neither the
General Partner nor any Limited Partner shall have any obligation to contribute
to the capital of the Partnership, or otherwise provide funds, to enable the
Partnership to fund its obligations under this Section 7.7.
B. It is the intention of the Partners that the General Partner will
incur no liability to the Partnership or any Limited Partner for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the General Partner carried out its duties in good faith. In
addition, the General Partner shall not be responsible for any misconduct or
negligence on the part of its agents, provided the General Partner appointed
such agents in good faith. Nothing herein shall be construed as prohibiting the
General Partners from consulting with legal counsel, accountants, appraiser,
management consultants, investment bankers and other consultants and advisors,
and any action that the General Partner takes or omits to take in reliance upon
the opinions of such persons, as to matters that it reasonably believes
26
<PAGE>
to be within their professional or expert competence, shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding upon receipt by the Partnership of (i) a
written affirmation by the Indemnitee of the Indemnitee's good faith belief that
the standard of conduct necessary for indemnification by the Partnership as
authorized in Section 7.7A has been met, and (ii) a written undertaking by or on
behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
D. The indemnification provided by this Section 7.7 shall be in addition
to any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement pursuant to which
such Indemnitee is indemnified.
E. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnitees and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
F. For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
G. In no event may an Indemnitee subject any of the Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
H. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
I. The provisions of this Section 7.7 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.7, as in effect immediately
prior to such amendment, modification, or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
27
<PAGE>
Section 7.8 Liability of the General Partner
--------------------------------
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner and its officers and directors shall not be liable for
monetary damages to the Partnership, any Partners or any Assignees for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that, as stated in Section
7.1D, the General Partner is acting on behalf of the Partnership and the
shareholders of the Company collectively, that the General Partner is under no
obligation to consider the separate interests of the Limited Partners in
deciding whether to cause the Partnership to take (or decline to take) any
actions, and that the General Partner shall not be liable for monetary damages
for losses sustained, liabilities incurred, or benefits not derived by Limited
Partners in connection with such decisions, provided that the General Partner
has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in
Section 7.1A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
--------------------------------------------
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to
the extent provided by the General Partner in the power of attorney, have full
power and authority to do and perform all and every act and duty which is
permitted or required to be done by the General Partner hereunder.
28
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D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Company to continue to
qualify as a REIT; or (ii) to avoid the Company incurring any taxes under
Section 857 or Section 4981 of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
---------------------------
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby
declares and warrants that any Partnership assets for which legal title is held
in the name of the General Partner or any nominee or Affiliate of the General
Partner shall be held by the General Partner for the use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided,
--------
however, that the General Partner shall use its best efforts to cause beneficial
- -------
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable if failure to so vest such title would have a material
adverse effect on the Partnership. All Partnership assets shall be recorded as
the property of the Partnership in its books and records, irrespective of the
name in which legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties
-------------------------
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
29
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ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
-----------------------
The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Section 10.5 hereof, or under
the Act.
Section 8.2 Management of Business
----------------------
No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, employee, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such)
shall take part in the operation, management or control (within the meaning of
the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any
of its Affiliates or any officer, director, employee, partner, agent or trustee
of the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
--------------------------------------
Subject to any agreements entered into pursuant to Section 7.6E hereof and
any other agreements entered into by a Limited Partner or its Affiliates with
the Partnership or any of its Subsidiaries, any Limited Partner (other than the
Company) and any officer, director, employee, agent, trustee, Affiliate or
shareholder of any Limited Partner shall be entitled to and may have business
interests and engage in business activities in addition to those relating to the
Partnership, including business interests and activities that are in direct
competition with the Partnership or that are enhanced by the activities of the
Partnership. Neither the Partnership nor any Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner or
Assignee. None of the Limited Partners (other than the Company) nor any other
Person shall have any rights by virtue of this Agreement or the Partnership
relationship established hereby in any business ventures of any other Person and
such Person shall have no obligation pursuant to this Agreement to offer any
interest in any such business ventures to the Partnership, any Limited Partner
or any such other Person, even if such opportunity is of a character which, if
presented to the Partnership, any Limited Partner or such other Person, could be
taken by such Person.
Section 8.4 Return of Capital
-----------------
Except pursuant to the right of redemption set forth in Section 8.6,
Section 8.7 and Section 8.8 hereof no Limited Partner shall be entitled to the
withdrawal or return of its Capital Contribution, except to the extent of
distributions made pursuant to this Agreement or upon termination of the
Partnership as provided herein. Except to the extent provided by Exhibit C
---------
hereof or as otherwise expressly provided in this Agreement, no Limited Partner
or Assignee shall have priority over any other Limited Partner or Assignee,
either as to the return of Capital Contributions or as to profits, losses or
distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
------------------------------------------------------
A. In addition to the other rights provided by this Agreement or by the
Act, and except as
30
<PAGE>
limited by Section 8.5C hereof, each Limited Partner shall have the right, for a
purpose reasonably related to such Limited Partner's interest as a limited
partner in the Partnership, upon written demand with a statement of the purpose
of such demand and at such Limited Partner's own expense (including such copying
and administrative charges as the General Partner may establish from time to
time):
(1) to obtain a copy of the most recent annual and quarterly reports
filed with the Securities and Exchange Commission by the Company
pursuant to the Securities Exchange Act of 1934, as amended;
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate of Limited
Partnership and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this
Agreement, the Certificate of Limited Partnership and all
amendments thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to
contribute in the future, and the date on which each became a
Partner.
B. The Partnership shall notify each Limited Partner, upon request, of
the then current Conversion Factor and the REIT Shares Amount per Partnership
Unit and, with reasonable detail, how the same was determined.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information, the disclosure of which
the General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business; or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
Section 8.6 Common Unit Redemption Right
----------------------------
A. Subject to Sections 8.6B and 8.6C hereof, on or after that date which
is twelve (12) months after the Effective Date, each Limited Partner (other than
the Company) shall have the right (the "Redemption Right") to require the
----------------
Partnership to redeem on a Specified Redemption Date all or a portion of the
Common Units held by such Limited Partner at a redemption price per Common Unit
equal to and in the form of the Cash Amount to be paid by the Partnership. The
Redemption Right shall be exercised pursuant to a Notice of Redemption delivered
to the Partnership (with a copy to the Company) by the Limited Partner who is
exercising the Redemption Right (the "Redeeming Partner"); provided, however,
-------- -------
that the Partnership shall not be obligated to satisfy such Redemption Right if
the Company elects to
31
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purchase the Common Units subject to the Notice of Redemption pursuant to
Section 8.6B hereof. A Limited Partner may not exercise the Redemption Right for
less than one thousand five hundred (1,500) Common Units or, if such Limited
Partner holds less than one thousand five hundred (1,500) Common Units, all of
the Partnership Units held by such Partner. The Redeeming Partner shall have no
right, with respect to any Common Units so redeemed, to receive any
distributions paid on or after the Specified Redemption Date. The Assignee of
any Limited Partner may exercise the rights of such Limited Partner pursuant to
this Section 8.6, and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Assignee. In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount shall be paid by the Partnership
directly to such Assignee and not to such Limited Partner.
B. Notwithstanding the provisions of Section 8.6A hereof, upon an
election by a Limited Partner to exercise the Redemption Right, the Company may,
in its sole and absolute discretion (subject to the limitations on ownership and
transfer of REIT Shares set forth in the Articles of Incorporation of the
Company), elect to assume directly and satisfy a Redemption Right by paying to
the Redeeming Partner either the Cash Amount or the REIT Shares Amount, as the
Company determines in its sole and absolute discretion, whereupon the Company
shall acquire the Common Units offered for redemption by the Redeeming Partner
and shall be treated for all purposes of this Agreement as the owner of such
Common Units. If the Company shall elect to exercise its right to purchase
Common Units under this Section 8.6B with respect to a Notice of Redemption, it
shall so notify the Redeeming Partner within five (5) Business Days after the
receipt by it of such Notice of Redemption. Unless the Company shall exercise
its right to purchase Common Units from the Redeeming Partner pursuant to this
Section 8.6B, the Company shall not have any obligation to the Redeeming Partner
or the Partnership with respect to the Redeeming Partner's exercise of the
Redemption Right. In the event the Company shall exercise its right to purchase
Common Units with respect to the exercise of a Redemption Right in the manner
described in the first sentence of this Section 8.6B, the Partnership shall have
no obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of such Redemption Right, and each of the Redeeming
Partner, the Partnership, and the Company shall treat the transaction between
the Company and the Redeeming Partner, for federal income tax purposes, as a
sale of the Redeeming Partner's Common Units to the Company. Each Redeeming
Partner agrees to execute such documents as the Company may reasonably require
in connection with the issuance of REIT Shares upon exercise of the Redemption
Right.
C. Notwithstanding the provisions of Section 8.6A and Section 8.6B
hereof, a Partner shall not be entitled to exercise the Redemption Right
pursuant to Section 8.6A hereof if the delivery of REIT Shares to such Partner
on the Specified Redemption Date by the Company pursuant to Section 8.6B hereof
(regardless of whether or not the Company would in fact exercise its rights
under Section 8.6B hereof) would be prohibited under the Articles of
Incorporation of the Company.
D. In the event that the Partnership issues additional Partnership
Interests pursuant to Section 4.2A hereof, the General Partner shall make such
revisions to this Section 8.6 as it determines are necessary to reflect the
issuance of such additional Partnership Interests.
Section 8.7 Series A Preferred Units Redemption Right
-----------------------------------------
The Partnership shall have the right to redeem any issued Series A
Preferred Units pursuant to the redemption terms set forth on Exhibit F attached
---------
hereto.
32
<PAGE>
Section 8.8 Series B Preferred Units Redemption Right
-----------------------------------------
The Partnership shall have the right to redeem any issued Series B
Preferred Units pursuant to the redemption terms set forth on Exhibit G attached
---------
hereto.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
----------------------
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Section 9.3
hereof. Any records maintained by or on behalf of the Partnership in the
regular course of its business may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, micrographics or any other information
storage device, provided that the records so maintained are convertible into
-------- ----
clearly legible written form within a reasonable period of time. The books of
the Partnership shall be maintained, for financial and tax reporting purposes,
on an accrual basis in accordance with generally accepted accounting principles,
or such other basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
-----------
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
-------
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the Partnership
Year, an annual report containing financial statements of the Partnership, or of
the Company if such statements are prepared solely on a consolidated basis with
the Company, for such Partnership Year, presented in accordance with generally
accepted accounting principles, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the General
Partner.
B. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the Company, if such
statements are prepared solely on a consolidated basis with the Company, and
such other information as may be required by applicable law or regulation, or as
the General Partner determines to be appropriate.
33
<PAGE>
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
--------------------------
The General Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
-------------
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
pursuant to the Code. Notwithstanding the above, in making any such tax election
the General Partner shall take into account the tax consequences to the Limited
Partners resulting from any such election. The General Partner shall make such
tax elections on behalf of the Partnership as the Limited Partners holding a
majority of the Percentage Interests of the Limited Partners (excluding Limited
Partner Interests held by the Company) request, provided that the General
Partner believes that such election is not adverse to the interests of the
General Partner, including its interest in preserving its qualification as a
REIT under the Code. The General Partner intends that Section 704(c) allocations
with respect to contributed property shall be made by the election of the so-
called "traditional method" with curative allocations limited solely to
allocations of gain on sale of such contributed property to the extent
allocations of depreciation deductions with respect to such contributed property
to non-contributing Partners have been limited by the so-called "ceiling rule",
as described in Regulations Section 1.704-3(c)(3)(iii)(B). The General Partner
shall have the right to seek to revoke any tax election it makes (including,
without limitation, the election under Section 754 of the Code) upon the General
Partner's determination, in its sole and absolute discretion, that such
revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner
-------------------
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
--------
however, that such information is provided to the Partnership by the Limited
- -------
Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of
Partnership items required to be taken into account by a Partner
for income tax purposes (such administrative proceedings being
referred to as a "tax audit" and such judicial proceedings being
referred to as "judicial review"), and in the settlement agreement
the tax matters partner may expressly state that such agreement
shall bind all Partners, except that such settlement agreement
shall not bind any Partner (i) who (within the time prescribed
34
<PAGE>
pursuant to the Code and Regulations) files a statement with the
IRS providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such
Partner; or (ii) who is a "notice partner" (as defined in Section
6231(a)(8) of the Code) or a member of a "notice group" (as
defined in Section 6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into
account by a Partner for tax purposes (a "final adjustment") is
mailed to the tax matters partner, to seek judicial review of such
final adjustment, including the filing of a petition for
readjustment with the Tax Court or the filing of a complaint for
refund with the United States Claims Court or the District Court
of the United States for the district in which the Partnership's
principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS
and, if any part of such request is not allowed by the IRS, to
file an appropriate pleading (petition or complaint) for judicial
review with respect to such request;
(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be
taken account of by a Partner for tax purposes, or an item
affected by such item; and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review
proceeding to the extent permitted by applicable law or
regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 hereof shall be fully applicable to the tax
matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees
and expenses) shall be borne by the Partnership. Nothing herein shall be
construed to restrict the Partnership from engaging an accounting firm to assist
the tax matters partner in discharging its duties hereunder, so long as the
compensation paid by the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
-----------------------
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.
35
<PAGE>
Section 10.5 Withholding
-----------
Each Limited Partner hereby authorizes the Partnership to withhold from, or
pay on behalf of or with respect to, such Limited Partner any amount of federal,
state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner. Without limitation, in
such event the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting Limited Partner to the General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder
shall bear interest at the lesser of (A) the base rate on corporate loans at
large United States money center commercial banks, as published from time to
time in The Wall Street Journal, plus four (4) percentage points, or (B) the
-----------------------
maximum lawful rate of interest on such obligation, such interest to accrue from
the date such amount is due (i.e., fifteen (15) days after demand) until such
----
amount is paid in full. Each Limited Partner shall take such actions as the
Partnership or the General Partner shall request in order to perfect or enforce
the security interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
--------
A. The term "transfer," when used in this Article 11 with respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person, and includes a sale,
assignment, gift, pledge (except for a pledge in which the pledgee agrees not to
foreclose with respect to such Partnership Unit until after the first
anniversary of the initial public offering of the Company), encumbrance,
hypothecation, mortgage, exchange or any other disposition by operation of law
or otherwise. The term "transfer" when used in this
36
<PAGE>
Article 11 does not include any redemption of Partnership Interests by the
Partnership from a Limited Partner or any acquisition of Partnership Units from
a Limited Partner by the Company pursuant to Section 8.6 hereof. No part of the
interest of a Limited Partner shall be subject to the claims of any creditor,
any spouse for alimony or support, or to legal process, and may not be
voluntarily or involuntarily alienated or encumbered except as may be
specifically provided for in this Agreement or consented to by the General
Partner.
B. No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
Section 11.2 Limited Partners' Rights to Transfer
------------------------------------
A. Subject to the provisions of Sections 11.2.C, 11.2.D, 11.2.E, and
11.3 hereof, a Limited Partner (other than the Company) may, after the
expiration of one year from the Effective Date transfer, with or without the
consent of the General Partner, all or any portion of its Partnership Interest,
or any of such Limited Partner's economic rights as a Limited Partner.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited Partner of
its Partnership Units if, in the opinion of legal counsel to the Partnership,
such transfer would require filing of a registration statement under the
Securities Act of 1933 or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Units.
D. No transfer by a Limited Partner of its Partnership Units may be made
to any Person if (i) in the opinion of legal counsel for the Partnership, it
would result in the Partnership being treated as an association taxable as a
corporation; (ii) it is made within one year of the Effective Date; (iii) such
transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" with the meaning of
Section 7704 of the Code; (iv) such transfer would cause the Partnership to
become, with respect to any employee benefit plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(c) of the Code); (v) such transfer would, in
the opinion of legal counsel for the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any employee benefit plan
pursuant to Department of Labor Regulations Section 2510.2-101; or (vi) such
transfer would subject the Partnership to be regulated under the Investment
Company Act of 1940, the Investment Advisors Act of 1940 or the Employee
Retirement Income Security Act of 1974, each as amended.
E. No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section 1.752-
4(b) of the Regulations) to any lender to the Partnership whose loan constitutes
a Nonrecourse Liability, without the consent of the General Partner, in its sole
and absolute discretion; provided that as a condition to such consent the lender
-------- ----
will be required to
37
<PAGE>
enter into an arrangement with the Partnership and the General Partner to redeem
for the Cash Amount any Partnership Units in which a security interest is held
simultaneously with the time at which such lender would be deemed to be a
partner in the Partnership for purposes of allocating liabilities to such lender
under Section 752 of the Code.
Section 11.3 Substituted Limited Partners
----------------------------
A. No Limited Partner shall have the right to substitute a transferee as
a Limited Partner in his place. The General Partner shall, however, have the
right to consent to the admission of a transferee of the interest of a Limited
Partner pursuant to this Section 11.3 as a substituted limited partner (the
"Substituted Limited Partner"), which consent may be given or withheld by the
General Partner in its sole and absolute discretion. The General Partner's
failure or refusal to permit a transferee of any such interests to become a
Substituted Limited Partner shall not give rise to any cause of action against
the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner
in accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
C. Upon the admission of a Substituted Limited Partner, the General
Partner shall amend Exhibit A to reflect the name, address, number of
---------
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.4 Assignees
---------
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee as a Substituted Limited
Partner, as described in Section 11.3 hereof, such transferee shall be
considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses,
Recapture Income, and any other items, gain, loss deduction and credit of the
Partnership attributable to the Partnership Units assigned to such transferee,
but except as otherwise provided in Section 8.6A hereof shall not be deemed to
be a holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to have
been voted on such matter in the same proportion as all other Partnership Units
held by Limited Partners are voted). In the event any such transferee desires
to make a further assignment of any such Partnership Units, such transferee
shall be subject to all of the provisions of this Article 11 to the same extent
and in the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
Section 11.5 General Provisions
------------------
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6 hereof.
B. Any Limited Partner who shall transfer all of its Partnership Units
in a transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such
38
<PAGE>
Partnership Units as Substitute Limited Partners. Similarly, any Limited Partner
who shall transfer all of its Partnership Units pursuant to a redemption of all
of its Partnership Units under Section 8.6 hereof shall cease to be a Limited
Partner.
C. Transfers pursuant to this Article 11 may only be made on the first
day of a fiscal quarter of the Partnership, unless the General Partner otherwise
agrees.
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or redeemed or transferred pursuant to Section 8.6
hereof on any day other than the first day of a Partnership Year, then Net
Income, Net Losses, each item thereof and all other items attributable to such
interest for such Partnership Year shall be divided and allocated between the
transferor Partner and the transferee Partner by taking into account their
varying interests during the Partnership Year in accordance with Section 706(d)
of the Code, using the interim closing of the books method. Solely for purposes
of making such allocations, each of such items for the calendar month in which
the transfer or assignment occurs shall be allocated to the transferee Partner,
and none of such items for the calendar month in which a redemption occurs shall
be allocated to the Redeeming Partner; provided, however, that the General
-------- -------
Partner may adopt such other conventions relating to allocations in connection
with transfers, assignments or redemptions as it determines are necessary or
appropriate. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment, or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and in the case of a
transfer or assignment other than a redemption, all distributions of Available
Cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
--------------------------------------
A successor to all of the General Partner Interest who is proposed to be
admitted as a successor General Partner shall be admitted to the Partnership as
the General Partner, effective upon such transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement and such other documents or instruments as may be required to
effect the admission. In the case of such admission on any day other than the
first day of a Partnership Year, all items attributable to the General Partner
Interest for such Partnership Year shall be allocated between the transferring
General Partner and such successor as provided in Section 11.5D hereof.
Section 12.2 Admission of Additional Limited Partners
----------------------------------------
A. After the admission to the Partnership of the initial Limited Partners
on the date hereof, a Person who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the power
of attorney granted in Section 2.4 hereof and (ii) such
39
<PAGE>
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as an Additional
Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no
Person shall be admitted as an Additional Limited Partner without the consent of
the General Partner, which consent may be given or withheld in the General
Partner's sole and absolute discretion. The admission of any Person as an
Additional Limited Partner shall become effective on the date upon which the
name of such Person is recorded on the books and records of the Partnership,
following the consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on
any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items allocable among Partners and
Assignees for such Partnership Year shall be allocated among such Additional
Limited Partner and all other Partners and Assignees by taking into account
their varying interests during the Partnership Year in accordance with Section
706(d) of the Code, using any convention permitted by law and selected by the
General Partner. Solely for purposes of making such allocations, each such item
for the calendar month in which an admission of any Additional Limited Partner
occurs shall be allocated among all of the Partners and Assignees, including
such Additional Limited Partner; provided, however, that the General Partner may
-------- -------
adopt such other conventions relating to allocations to Additional Limited
Partners as it determines are necessary or appropriate. All distributions of
Available Cash with respect to which the Partnership Record Date is before the
date of such admission shall be made solely to Partners and Assignees, other
than the Additional Limited Partner, and all distributions of Available Cash
thereafter shall be made to all of the Partners and Assignees, including such
Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate of Limited
-------------------------------------------------
Partnership
- -----------
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
---------
required by law, shall prepare and file an amendment to the Certificate of
Limited Partnership and may for this purpose exercise the power of attorney
granted pursuant to Section 2.4 hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
-----------
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. Subject to Section 15.1 hereof, the
Partnership shall dissolve, and its affairs shall be wound up, only upon the
first to occur of any of the following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
40
<PAGE>
B. an event of withdrawal of the General Partner, as defined in the Act
(other than an event of bankruptcy), unless, within ninety (90) days after such
event of withdrawal a majority in interest of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of the date of withdrawal, of a successor General Partner;
C. from and after the date of this Agreement through December 31, 2099,
an election to dissolve the Partnership made by the General Partner with the
Consent of Partners holding fifty percent (50%) of the Percentage Interests of
the Limited Partners (including Limited Partner Interests held by the Company);
D. on or after January 1, 2100, an election to dissolve the Partnership
made by the General Partner, in its sole and absolute discretion;
E. entry of a decree of judicial dissolution of the Partnership pursuant
to the provisions of the Act;
F. the sale of all or substantially all of the assets and properties of
the Partnership; or
G. a final and non-appealable judgment is entered by a court of competent
jurisdiction ruling that the General Partner is bankrupt or insolvent, or a
final and non-appealable order for relief is entered by a court with appropriate
jurisdiction against the General Partner, in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect, unless prior
to the entry of such order or judgment all of the remaining Partners agree in
writing to continue the business of the Partnership and to the appointment,
effective as of a date prior to the date of such order or judgment, of a
substitute General Partner.
Section 13.2 Winding Up
----------
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by a majority in interest of the Limited Partners (the General
Partner or such other Person being referred to herein as the "Liquidator"),
shall be responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities and
property and the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom
(which may, to the extent determined by the General Partner, include shares of
common stock in the Company) shall be applied and distributed in the following
order:
(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
41
<PAGE>
(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners; and
(4) The balance to the Partners in accordance with their positive
Capital Account balances, after giving effect to all
contributions, distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2A hereof which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating
Partnership assets, collecting amounts owed to the Partnership,
and paying any contingent or unforeseen liabilities or obligations
of the Partnership or the General Partner arising out of or in
connection with the Partnership. The assets of any such trust
shall be distributed to the General Partner and Limited Partners
from time to time, in the reasonable discretion of the Liquidator,
in the same proportions as the amount distributed to such trust by
the Partnership would otherwise have been distributed to the
General Partner and Limited Partners pursuant to this Agreement;
or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect
the unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld or escrowed amounts shall
-------- ----
be distributed to the General Partner and Limited Partners in the
manner and order of priority set forth in Section 13.2A as soon as
practicable.
42
<PAGE>
Section 13.3 Compliance with Timing Requirements of Regulations
--------------------------------------------------
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If at such time as the Partnership (or the General Partner's interest
therein is "liquidated" within the meaning of Treasury Regulations Section
1.704-1(b)(2)(ii)(g), the General Partner has a deficit balance in his Capital
Account (after giving effect to all contributions, distributions and allocations
for all Fiscal Years or portions thereof, including the year during which such
liquidation occurs, the General Partner shall contribute to the capital of the
Partnership the amount necessary to restore such deficit balance to zero in
compliance with Treasury Regulations Section 1.704-1(b)(2)(ii)(b)(3)).
-
Section 13.4 Deemed Termination
------------------
Notwithstanding any other provision of this Article 13, in the event the
Partnership is considered "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes and for purposes of maintaining Capital
Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed to have
---------
(i) contributed the Partnership property in kind to a new partnership (the "New
Partnership"), which shall be deemed to have assumed and taken such property
subject to all Partnership liabilities in exchange for all of the interests in
such New Partnership, and (ii) distributed such interests to the Partners
pursuant to the provisions of this Agreement in liquidation of the Partnership,
subsequent to which the New Partnership shall be referred to as the Partnership
for all purposes of this Agreement.
Section 13.5 Rights of Limited Partners
--------------------------
Except as otherwise provided in this Agreement, each Limited Partner shall
look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution
---------------------
In the event a Liquidating Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners pursuant
to Section 13.1 hereof, result in a dissolution of the Partnership, the General
Partner shall, within thirty (30) days thereafter, provide written notice
thereof to each of the Partners.
Section 13.7 Termination of Partnership and Cancellation of Certificate
----------------------------------------------------------
of Limited Partnership
----------------------
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications
43
<PAGE>
of the Partnership as a foreign limited partnership in jurisdictions other than
the State of Delaware shall be canceled and such other actions as may be
necessary to terminate the Partnership shall be taken.
Section 13.8 Reasonable Time for Winding-Up
------------------------------
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.9 Waiver of Partition
-------------------
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
----------
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the Company) holding at least forty percent
(40%) or more of the Common Units. Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners. The General
Partner shall seek the written vote of the Partners on the proposed amendment or
shall call a meeting to vote thereon and to transact any other business that it
may deem appropriate. For purposes of obtaining a written vote, the General
Partner may require a response within a reasonable specified time, but not less
than fifteen (15) days, and failure to respond in such time period shall
constitute a vote which is consistent with the General Partner's recommendation
with respect to the proposal. Except as provided in Section 13.1.C, 14.1.B,
14.1.C or 14.1.D hereof, a proposed amendment shall be adopted and be effective
as an amendment hereto if it is approved by the General Partner and it receives
the Consent of Partners holding a majority of the Percentage Interests of the
Limited Partners (including Limited Partner Percentage Interests held by the
Company); provided, that, an action shall become effective at such time as the
-------- ----
requisite consents are received even if prior to such specified time.
B. Notwithstanding Section 14.1A hereof, the General Partner shall have
the power, without the consent of the Limited Partners, to amend this Agreement
as may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender any
right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or withdrawal
of Partners in accordance with this Agreement;
44
<PAGE>
(3) to set forth and reflect in the Agreement the designations,
rights, powers, duties, and preferences of the holders of any
additional Partnership Interests issued pursuant to Section 4.2A
hereof;
(4) to reflect a change that is of an inconsequential nature and does
not adversely affect the Limited Partners in any material respect,
or to cure any ambiguity, correct or supplement any provision in
this Agreement not inconsistent with law or with other provisions,
or make other changes with respect to matters arising under this
Agreement that will not be inconsistent with law or with the
provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines contained
in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any action
under this Section 14.1B is taken.
C. Notwithstanding Section 14.1A and 14.1B hereof, this Agreement shall
not be amended without the Consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the Partnership into
a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner (other than as a result of the issuance of Partnership Interests) to
receive distributions pursuant to Article 5 or Article 13 or the allocations
specified in Article 6 (except as permitted pursuant to Section 4.2 and Section
14.1B(3) hereof); (iv) alter or modify the Redemption Right and REIT Shares
Amount as set forth in Section 8.6 hereof, and the related definitions, in a
manner adverse to such Partner; (v) cause the termination of the Partnership
prior to the time set forth in Sections 2.5 or 13.1 hereof; or (vi) amend this
Section 14.1C. Further, no amendment may alter the restrictions on the General
Partner's authority set forth in Section 7.3B hereof without the Consent
specified in that section. In addition, Section 8.7 may only be amended as
provided therein.
D. Notwithstanding Section 14.1A or Section 14.1B hereof, the General
Partner shall not (except in connection with amendments made to reflect the
issuance of additional Partnership Interests and the relative rights, powers and
duties incident thereto) amend Sections 4.2A, 7.5, 7.6 or 14.2 hereof without
the Consent of Limited Partners holding a majority of the Percentage Interests
of the Limited Partners, excluding Limited Partner Interests held by the General
Partner or its Affiliates.
Section 14.2 Meetings of the Partners
------------------------
A. Meetings of the Partners may be called by the General Partner and
shall be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the Company) holding forty percent (40%) or more of
the Common Units. The request shall state the nature of the business to be
transacted. Notice of any such meeting shall be given to all Partners not less
than seven (7) days nor more than thirty (30) days prior to the date of such
meeting. Partners may vote in person or by proxy at such meeting. Whenever the
vote or Consent of the Partners is permitted or required under this Agreement,
such vote or Consent may be given at a meeting of the Partners or may be given
in accordance with the procedure prescribed in Section 14.1A hereof. Except as
otherwise expressly provided in this Agreement,
45
<PAGE>
the Consent of holders of a majority of the Percentage Interests held by Limited
Partners (including Limited Partnership Percentage Interests held by the
Company) shall control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Limited Partner may authorize any Person or Persons to act for
him by proxy on all matters in which a Limited Partner is entitled to
participate, including waiving notice of any meeting, or voting or participating
at a meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of twelve (12)
months from the date thereof unless otherwise provided in the proxy. Every
proxy shall be revocable at the pleasure of the Limited Partner executing it,
such revocation to be effective upon the Partnership's receipt of written notice
of such revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate. Without limitation, meetings of Partners may be conducted in the
same manner as meetings of the shareholders of the Company and may be held at
the same time, and as part of, meetings of the shareholders of the Company.
E. The Series A Preferred Units do not have any voting rights with
respect to the Partnership, except that any action which would materially alter
the economic rights or preferences of the Series A Preferred Units shall only be
taken if at least a majority of the interests of the holders of Series A
Preferred Units approve such action.
F. The Series B Preferred Units do not have any voting rights with
respect to the Partnership, except that any action which would materially alter
the economic rights or preferences of the Series B Preferred Units shall only be
taken if at least a majority of the interests of the holders of Series B
Preferred Units approve such action.
46
<PAGE>
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Restrictive Covenants
---------------------
A. For a period of two (2) years from the Effective Date, (i) so long as
the single real estate property located at 51 New York Avenue, Framingham,
Massachusetts, which is currently owned by the Partnership, is the only real
estate property owned by Partnership, the aggregate amount of borrowed money
indebtedness of the General Partner and the Partnership on a consolidated basis
shall not exceed $1,000,000 and (ii) if the Partnership proposes to acquire
additional properties, the aggregate fair market value of all properties of the
General Partner and the Partnership on a consolidated basis (net of all
indebtedness of the General Partner and the Partnership on a consolidated basis
for money borrowed) after giving effect to such acquisitions must equal or
exceed $3,000,000.
B. For a period of two (2) years from the Effective Date, the Partnership
shall either (i) continue to own the real estate property located at 51 New York
Avenue, Framingham, Massachusetts or (ii) if such property is disposed of, own
additional or substitute assets having an aggregate fair market value (net of
all indebtedness of the General Partner and the Partnership on a consolidated
basis for money borrowed and after giving effect to such disposition) at least
equal to $3,000,000.
C. For a period of two (2) years from the Effective Date, the Partnership
shall not be liquidated or dissolved.
Section 15.2 Addresses and Notice
--------------------
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of written communication to the Partner or
Assignee at the address set forth in Exhibit A or such other address of which
---------
the Partner shall notify the General Partner in writing.
Section 15.3 Titles and Captions
-------------------
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.4 Pronouns and Plurals
--------------------
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
47
<PAGE>
Section 15.5 Further Action
--------------
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.6 Binding Effect
--------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.7 Creditors
---------
Other than as expressly set forth herein with respect to the Indemnities,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.
Section 15.8 Waiver
------
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.9 Counterparts
------------
This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all of the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto.
Section 15.10 Applicable Law
--------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the Commonwealth of Massachusetts, without regard to the
principles of conflicts of law.
Section 15.11 Invalidity of Provisions
------------------------
If any provision of this Agreement shall to any extent be held void or
unenforceable (as to duration, scope, activity, subject or otherwise) by a court
of competent jurisdiction, such provision shall be deemed to be modified so as
to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable. In such event, the
remainder of this Agreement (or the application of such provision to persons or
circumstances other than those in respect of which it is deemed to be void or
unenforceable) shall not be affected thereby. Each other provision of this
Agreement, unless specifically conditioned upon the voided aspect of such
provision, shall remain valid and enforceable to the fullest extent permitted by
law; any other provisions of this Agreement that are specifically conditioned on
the voided aspect of such invalid provision shall also be deemed to be modified
so as to constitute a provision conforming as nearly as possible to the original
provision while still remaining valid and enforceable to the fullest extent
permitted by law.
48
<PAGE>
Section 15.12 Entire Agreement
----------------
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and supersedes the Original
Agreement, any other prior written or oral understandings or agreements among
them with respect thereto.
[Remainder of Page Intentionally Left Blank]
49
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
GENERAL PARTNER:
PROPERTY CAPITAL TRUST, INC.
By: ____________________________________
Name:
Title:
50
<PAGE>
LIMITED PARTNER SIGNATURE PAGE
The undersigned, desiring to become one of the within named Limited
Partners of Property Capital Trust Limited Partnership, hereby becomes a party
to the First Amended and Restated Agreement of Limited Partnership of Property
Capital Trust Limited Partnership by and among Property Capital Trust, Inc. and
such Limited Partners, dated as of August __, 1998. The undersigned agrees that
this signature page may be attached to any counterpart of said Agreement of
Limited Partnership.
Signature Line for Limited Partner:
PROPERTY CAPITAL TRUST, INC.
By: _______________________________
Name:
Title:
Address of Limited Partner: 177 Milk Street
Boston, MA 02109
51
<PAGE>
LIMITED PARTNER SIGNATURE PAGE
The undersigned, desiring to become one of the within named Limited
Partners of Property Capital Trust Limited Partnership, hereby becomes a party
to the First Amended and Restated Agreement of Limited Partnership of Property
Capital Trust Limited Partnership by and among Property Capital Trust, Inc. and
such Limited Partners, dated as of August __, 1998. The undersigned agrees that
this signature page may be attached to any counterpart of said Agreement of
Limited Partnership.
Signature Line for Limited Partner:
___________________________________
Address of Limited Partner:
52
<PAGE>
Exhibit A-1
-----------
Partners Contributions and Partnership Interests
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
AGREED
CASH VALUE OF SERIES A SERIES B
NAME AND ADDRESS OF PARTNERSHIP CONTRIBUTED TOTAL COMMON PREFERRED PREFERRED PERCENTAGE
PARTNER CONTRIBUTION PROPERTY CONTRIBUTION UNITS UNITS UNITS INTEREST
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL _________ __________ __________ _______ __________ ____________ 100.0000%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
A-1-1
<PAGE>
Exhibit A-2
-----------
Partners Capital Accounts
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
COMMON NUMBER OF NUMBER OF SERIES B
NUMBER OF UNITS SERIES A SERIES A SERIES B PREFERRED
COMMON CAPITAL PREFERRED PREFERRED UNITS PREFERRED UNITS CAPITAL
NAME UNITS ACCOUNT UNITS CAPITAL ACCOUNT UNITS ACCOUNT
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
TOTAL ________ $1,499,977.00 ________ $2,787,653.00 ________ $212,347.00
- -----------------------------------------------------------------------------------------------------
</TABLE>
A-2-1
<PAGE>
Exhibit B
---------
Capital Account Maintenance
1. Capital Accounts of the Partners
--------------------------------
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Partner to the
Partnership pursuant to this Agreement; and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of
the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or
---------
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement; and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.
---------
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section 1.704-
1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under
Section 754 of the Code which may be made by the Partnership,
provided that the amounts of any adjustments to the adjusted bases
of the assets of the Partnership made pursuant to Section 734 of
the Code as a result of the distribution of property by the
Partnership to a Partner (to the extent that such adjustments have
not previously been reflected in the Partners' Capital Accounts)
shall be reflected in the Capital Accounts of the Partners in the
manner and subject to the limitations prescribed in Regulations
Section 1.704(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and deduction shall
be made without regard to the fact that items described in
Sections 705(a)(1)(B) or 705(a)(2)(B) of the Code are not
includable gross income or are neither currently deductible nor
capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted
basis of such property as of such date of disposition were equal
in amount to the Partnership's Carrying Value with respect to such
property as of such date.
(4) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or
loss, there shall be taken into account Depreciation for such
fiscal year.
B-1
<PAGE>
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any such
adjustment shall be taken into account as gain or loss from the
disposition of such asset.
C. A transferee (including an Assignee) of a Partnership Unit shall
succeed to a pro rata portion of the Capital Account of the transferor.
D. (1) Consistent with the provisions of Regulations Section 1.704-
1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying
Value of all Partnership assets shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the times of the
adjustments provided in Section 1.D(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an
actual sale of each such property and allocated pursuant to
Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest in
the Partnership by any new or existing Partner in exchange for
more than a de minimis Capital Contribution; (b) immediately
prior to the distribution by the Partnership to a Partner of more
than a de minimis amount of property as consideration for an
interest in the Partnership; and (c) immediately prior to the
liquidation of the Partnership within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g), provided, however, that
-------- -------
adjustments pursuant to clauses (a) and (b) above shall be made
only if the General Partner determines that such adjustments are
necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e), the
Carrying Value of Partnership assets distributed in kind shall be
adjusted upward or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership property, as of
the time any such asset is distributed.
(4) In determining Unrealized Gain or Unrealized Loss for purposes of
this Exhibit B, the aggregate cash amount and fair market value
---------
of all Partnership assets (including cash or cash equivalents)
shall be determined by the General Partner using such reasonable
method of valuation as it may adopt, or in the case of a
liquidating distribution pursuant to Article 13 of the Agreement,
shall be determined and allocated by the Liquidator using such
reasonable methods of valuation as it may adopt. The General
Partner, or the Liquidator, as the case may be, shall allocate
such aggregate value among the assets of the Partnership (in such
manner as it determines in its sole and absolute discretion to
arrive at a fair market value for individual properties).
E. The provisions of this Agreement (including this Exhibit B and other
---------
Exhibits to this Agreement) relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event the
General Partner shall determine that it is prudent to modify (i) the manner in
which the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed; or (ii) the manner in
which items are allocated
B-2
<PAGE>
among the Partners for federal income tax purposes in order to comply with such
Regulations or to comply with Section 704(c) of the Code, the General Partner
may make such modification without regard to Article 14 of the Agreement,
provided that it is not likely to have a material effect on the amounts
distributable to any Person pursuant to Article 13 of the Agreement upon the
dissolution of the Partnership. The General Partner also shall (i) make any
adjustments that are necessary or appropriate to maintain equality between the
Capital Accounts of the Partners and the amount of Partnership capital reflected
on the Partnership's balance sheet, as computed for book purposes, in accordance
with Regulations Section 1.704-1(b)(2)(iv)(q); and (ii) make any appropriate
modifications in the event unanticipated events might otherwise cause this
Agreement not to comply with Regulations Section 1.704-1(b). In addition, the
General Partner may adopt and employ such methods and procedures for (i) the
maintenance of book and tax capital accounts; (ii) the determination and
allocation of adjustments under Sections 704(c), 734 and 743 of the Code; (iii)
the determination of Net Income, Net Loss, taxable income and loss and items
thereof under this Agreement and pursuant to the Code; (iv) the adoption of
reasonable conventions and methods for the valuation of assets and the
determination of tax basis; (v) the allocation of asset value and tax basis; and
(vi) conventions for the determination of cost recovery, depreciation and
amortization deductions, as it determines in its sole discretion are necessary
or appropriate to execute the provisions of this Agreement, to comply with
federal and state tax laws, and are in the best interest of the Partners.
2. No Interest
-----------
No interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners' Capital Accounts.
3. No Withdrawal
-------------
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.
B-3
<PAGE>
Exhibit C
---------
Special Allocation Rules
1. Special Allocation Rules
------------------------
Notwithstanding any other provision of the Agreement or this Exhibit C, the
---------
following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section
-----------------------
6.1 of the Agreement or any other provisions of this Exhibit C, if there is a
---------
net decrease in Partnership Minimum Gain during any Partnership taxable year,
each Partner shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This
Section 1.A is intended to comply with the minimum gain chargeback requirements
in Regulations Section 1.704-2(f) and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.A, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of Partner Minimum Gain during such Partnership taxable
year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision
-------------------------------
of Section 6.1 of this Agreement or any other provisions of this Exhibit C
---------
(except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership taxable year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.702-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in
accordance with Regulations Section 1.704-2(i)(4). This Section 1.B is intended
to comply with the minimum gain chargeback requirement in such Section of the
Regulations and shall be interpreted consistently therewith. Solely for purposes
of the Section 1.B, each Partner's Adjusted Capital Account Deficit shall be
determined prior to any other allocations pursuant to Section 6.1 of the
Agreement or this Exhibit with respect to such Partnership taxable year, other
than allocations pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly
-----------------------
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-
1(b)(2)(ii)(d)(6), and after giving effect to the allocations required under
Sections 1.A and 1.B hereof such Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income, including gross income and gain for the
Partnership taxable year) shall be specially allocated to such Partner in an
amount and manner sufficient to eliminate, to the extent required by the
Regulations, its Adjusted Capital Account Deficit created by such adjustments,
allocations or distributions as quickly as possible.
C-1
<PAGE>
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
----------------------
taxable year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio to the
numerically closest ratio for such Partnership taxable year which would satisfy
such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
------------------------------
for any Partnership taxable year shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
----------------------------
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis, and such item of gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
G. Curative Allocations. The allocations set forth in Section 1.A
--------------------
through 1.F of this Exhibit C (the "Regulatory Allocations") are intended to
---------
comply with certain requirements of the Regulations under Section 704(b) of the
Code. The Regulatory Allocations may not be consistent with the manner in which
the Partners intend to divide Partnership distributions. Accordingly, the
General Partner is hereby authorized to divide other allocations of income,
gain, deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided among the Partners. In general, the Partners anticipate that, if
necessary, this will be accomplished by specially allocating other items of
income, gain, loss and deduction among the Partners so that the net amount of
the Regulatory Allocations and such special allocations to each person is zero.
However, the General Partner will have discretion to accomplish this result in
any reasonable manner; provided, however, that no allocation pursuant to this
-------- -------
Section 1.G shall cause the Partnership to fail to comply with the requirements
of Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e) or -2(i).
2. Allocations for Tax Purposes
----------------------------
A. Except as otherwise provided in this Section 2, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1 of the Agreement and
Section 1 of this Exhibit C, provided however, gain on the sale of property
--------- -------- -------
contributed as of the Effective Date with respect to which the General Partner
elects, the "traditional method with curative allocations" described in Treasury
Regulation Section 1.704-3(c)(3)(iii)(B) shall first be allocated to solely to
the Partners who contributed such Property, pro rata, in proportion to their
Percentage Interests, to the extent allocations to non-contributing Partners of
depreciation deductions with respect to such Contributed Property have been
limited by the so-called "ceiling rule."
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
C-2
<PAGE>
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners,
consistent with the principles of Section 704(c) of the Code
and the Regulations thereunder, to take into account the
variation between the 704(c) Value of such property and its
adjusted basis at the time of contribution; and
(b) any item of Residual Gain or Residual Loss attributable to a
Contributed Property shall be allocated among the Partners
in the same manner as its correlative item of "book" gain or
loss is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C.
---------
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code
and the Regulations thereunder to take into account the
Unrealized Gain or Unrealized Loss attributable to such
property and the allocations thereof pursuant to Exhibit B;
---------
and
(2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a
manner consistent with Section 2.B(1) of this Exhibit C; and
---------
(b) any item of Residual Gain or Residual Loss attributable to
an Adjusted Property shall be allocated among the Partners
in the same manner its correlative item of "book" gain or
loss is allocated pursuant to Section 6.1 of the Agreement
and Section 1 of this Exhibit C.
---------
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners the same manner as their correlative
item of "book" gain or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of the Exhibit C.
---------
C. To the extent that the Treasury Regulations promulgated pursuant to
Section 704(c) of the Code permit the Partnership to utilize alternative methods
to eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall have the authority to elect the method
to be used by the Partnership and such election shall be binding on all
Partners.
3. No Withdrawal
-------------
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.
C-3
<PAGE>
Exhibit D
---------
Notice of Redemption
The undersigned Limited Partner hereby irrevocably (i) redeems __________
Common Units in Property Capital Trust Limited Partnership in accordance with
the terms of the Second Amended and Restated Agreement of Limited Partnership of
Property Capital Trust and the Redemption Right referred to therein; (ii)
surrenders such Common Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Shares Amount (as determined by the
General Partner) deliverable upon exercise of the Redemption Right be delivered
to the address specified below, and if REIT Shares are to be delivered, such
REIT Shares be registered or placed in the name(s) and at the address(es)
specified below. The undersigned hereby, represents, warrants, and certifies
that the undersigned (a) has marketable and unencumbered title to such Common
Units, free and clear of the rights or interests of any other person or entity;
(b) has the full right, power, and authority to redeem and surrender such Common
Units as provided herein; and (c) has obtained the consent or approval of all
person or entities, if any, having the right to consent or approve such
redemption and surrender.
Dated:_________________________
Name of Limited Partner:____________________________________
Please Print
____________________________________
(Signature of Limited Partner)
____________________________________
(Street Address)
____________________________________
(City) (State) (ZipCode)
Signature Guaranteed by:
____________________________________
If REIT Shares are to be issued, issue to:
Name:_________________________________
Please insert social security or identifying number:__________________
D-1
<PAGE>
Exhibit E
---------
Recourse Debt Level Schedule
Recourse Debt Recourse Debt
Name of Limited Partner Percentage Amount
- ----------------------- --------------- ---------------
[_____________________] [____]% [____]%
Total $[_________]
E-1
<PAGE>
Exhibit F
---------
Series A Preferred Units Redemption Right
1. Redemption Right. At any time after the issuance of the Series A
----------------
Preferred Units, the Partnership, at its option and upon not less than 15 nor
more than 60 days' written notice, may redeem the Series A Preferred Units, in
whole or in part, at any time or from time to time, for cash at a redemption
price of $4.4812 per Series A Preferred Unit, plus all accrued and unpaid
distributions thereon to the date fixed for redemption required to be made
pursuant to Section 5.1A(i) of this Agreement (except as provided in Paragraph 3
below), without interest.
2. Limitations on Redemption. Unless full cumulative distributions on
-------------------------
all Series A Preferred Units required to be made pursuant to Section 5.1A(i) of
this Agreement shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past distribution periods and the then current distribution period, no
Series A Preferred Units shall be redeemed unless all Series A Preferred Units
are simultaneously redeemed. If less than all of the outstanding Series A
Preferred Units is to be redeemed, the Series A Preferred Units to be redeemed
shall be selected pro rata (as nearly as may be practicable without creating
fractional Series A Preferred Units).
3. Payment of Distributions in Connection with Redemption. Immediately
------------------------------------------------------
prior to any redemption of Series A Preferred Units, the Partnership shall pay,
in cash, any accumulated and unpaid distributions required to be made pursuant
to Section 5.1(a)(i) of this Agreement through the redemption date, unless a
redemption date falls after the Partnership Record Date and prior to the
corresponding distribution payment date, in which case each holder of Series A
Preferred Units at the close of business on such Partnership Record Date shall
be entitled to the distribution payable on such Units on the corresponding
distribution payment date notwithstanding the redemption of such Units before
such distribution payment date. Except as provided above, the Partnership will
make no payment or allowance for unpaid distributions, whether or not in
arrears, on Series A Preferred Units which are redeemed.
4. Procedures for Redemption.
-------------------------
(a) Notice of redemption will be mailed by the Partnership, postage
prepaid, not less than 15 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series A Preferred Units at
their respective addresses as they appear on Exhibit A-1 attached to this
-----------
Agreement. No failure to give such notice or any defect thereto or in the
mailing thereof shall affect the validity of the proceedings for the redemption
of any units of Series A Preferred Units except as to the holder to whom notice
was defective or not given.
(b) The notice of redemption shall state: (i) the redemption date;
(ii) the redemption price; (iii) the number of Series A Preferred Units to be
redeemed; and (iv) that distributions on the units to be redeemed will cease to
accrue on such redemption date.
(c) If notice of redemption of any Series A Preferred Units has been
given and if the funds necessary for such redemption have been set aside by the
Partnership in trust for the benefit of the holders of any Series B Preferred
Units so called for redemption, then from and after the redemption date
distributions will cease to accrue on such Series A Preferred Units, such Series
A Preferred Units shall no longer be deemed outstanding and all rights of the
holders of such shares will terminate, except the right to receive the
redemption price. On the redemption date the Series A Preferred Units shall be
redeemed by
F-1
<PAGE>
the Partnership at the redemption price plus any accrued and unpaid
distributions payable upon such redemption.
(d) The deposit of funds with a bank or trust corporation for the
purpose of redeeming Series A Preferred Units shall be irrevocable except that:
(i) the Partnership shall be entitled to receive from such bank or
trust corporation the interest or other earnings, if any, earned on any money so
deposited in trust, and the holders of the Series A Preferred Units redeemed
shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Trust and unclaimed
by the holders of the Series B Preferred Units entitled thereto at the
expiration of two years from the applicable redemption date shall be repaid,
together with any interest or other earnings thereon, to the Partnership, and
after any such repayment, the holders of the Series A Preferred Units entitled
to the funds so repaid to the Partnership shall look only to the Partnership for
payment without interest or other earnings.
5. Status of Redeemed Units. Any Series A Preferred Units that shall at
------------------------
any time have been redeemed shall, after such redemption, have the status of
authorized but unissued Preferred Units, without designation as to series until
such Units are thereafter designated as part of a particular series by the
General Partner.
F-2
<PAGE>
Exhibit G
---------
Series B Preferred Units Redemption Right
1. Redemption Right. At any time after the issuance of the Series B
----------------
Preferred Units, the Partnership, at its option and upon not less than 15 nor
more than 60 days' written notice, may redeem the Series B Preferred Units, in
whole or in part, at any time or from time to time, for cash at a redemption
price of $.63125 per Series B Preferred Unit, plus all accrued and unpaid
distributions thereon to the date fixed for redemption required to be made
pursuant to Section 5.1A(ii) of this Agreement (except as provided in Paragraph
3 below), without interest.
2. Limitations on Redemption. Unless full cumulative distributions on
-------------------------
all Series A Preferred Units required to be made pursuant to Section 5.1A(i) of
this Agreement and full cumulative distributions on all Series B Preferred Units
required to be made pursaunt to Section 5.1A(ii) of this Agreement shall have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for all past distribution periods
and the then current distribution period, no Series B Preferred Units shall be
redeemed unless all Series B Preferred Units are simultaneously redeemed.
Notwithstanding anything to the contrary contained herein, no Series B Preferred
Units may be redeemed unless all Series A Preferred Units have first been
redeemed. If less than all of the outstanding Series B Preferred Units is to be
redeemed, the Series B Preferred Units to be redeemed shall be selected pro rata
(as nearly as may be practicable without creating fractional Series B Preferred
Units.
3. Payment of Distributions in Connection with Redemption. Immediately
------------------------------------------------------
prior to any redemption of Series B Preferred Units, the Partnership shall pay,
in cash, any accumulated and unpaid distributions through the redemption date,
unless a redemption date falls after the Partnership Record Date and prior to
the corresponding distribution payment date, in which case each holder of Series
B Preferred Units at the close of business on such Partnership Record Date shall
be entitled to the distribution payable on such Units on the corresponding
distribution payment date notwithstanding the redemption of such Units before
such distribution payment date. Except as provided above, the Partnership will
make no payment or allowance for unpaid distributions, whether or not in
arrears, on Series B Preferred Units which are redeemed.
4. Procedures for Redemption.
-------------------------
(a) Notice of redemption will be mailed by the Partnership, postage
prepaid, not less than 15 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series B Preferred Units at
their respective addresses as they appear on Exhibit A-1 attached to this
-----------
Agreement. No failure to give such notice or any defect thereto or in the
mailing thereof shall affect the validity of the proceedings for the redemption
of any units of Series B Preferred Units except as to the holder to whom notice
was defective or not given.
(b) The notice of redemption shall state: (i) the redemption date;
(ii) the redemption price; (iii) the number of Series B Preferred Units to be
redeemed; and (iv) that distributions on the units to be redeemed will cease to
accrue on such redemption date.
(c) If notice of redemption of any Series B Preferred Units has been
given and if the funds necessary for such redemption have been set aside by the
Partnership in trust for the benefit of the holders of any Series B Preferred
Units so called for redemption, then from and after the redemption date
distributions will cease to accrue on such Series B Preferred Units, such Series
B Preferred Units shall no
G-1
<PAGE>
longer be deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the redemption price. On the redemption
date the Series B Preferred Units shall be redeemed by the Partnership at the
redemption price plus any accrued and unpaid distributions payable upon such
redemption.
(d) The deposit of funds with a bank or trust corporation for the
purpose of redeeming Series B Preferred Units shall be irrevocable except that:
(i) the Partnership shall be entitled to receive from such bank or
trust corporation the interest or other earnings, if any, earned on any money so
deposited in trust, and the holders of the Series B Preferred Units redeemed
shall have no claim to such interest or other earnings; and
(ii) any balance of monies so deposited by the Trust and unclaimed
by the holders of the Series B Preferred Units entitled thereto at the
expiration of two years from the applicable redemption date shall be repaid,
together with any interest or other earnings thereon, to the Partnership, and
after any such repayment, the holders of the Series B Preferred Units entitled
to the funds so repaid to the Partnership shall look only to the Partnership for
payment without interest or other earnings.
5. Status of Redeemed Units. Any Series B Preferred Units that shall at
------------------------
any time have been redeemed shall, after such redemption, have the status of
authorized but unissued Preferred Units, without designation as to series until
such Units are thereafter designated as part of a particular series by the
General Partner.
G-2
<PAGE>
EXHIBIT 5.1
[Goodwin, Procter & Hoar LLP Letterhead]
November 20, 1998
Maryland Property Capital Trust, Inc.
177 Milk Street
Boston, MA 02109
Re: Legality of Securities to be Registered
under Registration Statement on Form S-4
----------------------------------------
Ladies and Gentlemen:
This opinion is furnished in connection with the registration on Form S-4
(the "Registration Statement") pursuant to the Securities Act of 1933, as
amended (the "Securities Act"), of 159,737 shares of common stock, par value
$.01 per share, of Maryland Property Capital Trust, Inc., a Maryland corporation
(the "Corporation"), which will be issued to the shareholders of Property
Capital Trust (the "Trust") in connection with the Merger (as defined below).
We have acted as counsel to the Corporation in connection with the
preparation and filing with the Securities and Exchange Commission of the
Registration Statement and the proposed merger (the "Merger") of the Trust into
the Corporation pursuant to the Agreement and Plan of Merger, by and between the
Corporation and the Trust, dated as of June 18, 1998, as amended (the "Merger
Agreement").
In connection with rendering this opinion, we have (i) assumed that, prior
to the consummation of the Merger, the number of authorized shares of the common
stock of the Corporation will be increased from 100 to 10,000,000 and (ii)
examined the Articles of Amendment and Restatement of the Corporation, as
expected to be filed with the Secretary of State of the State of Maryland, the
Bylaws of the Corporation, such records of the corporate proceedings of the
Corporation as we deemed material, the Registration Statement and the exhibits
thereto, and such other certificates, receipts, records and documents as we
considered necessary for the purposes of this opinion. In our examination, we
have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as certified,
photostatic or facsimile copies, the authenticity of the originals of such
copies and the authenticity of telephonic confirmations of public officials and
others. As to facts material to our opinion, we have relied upon certificates
or telephonic confirmations of public officials and certificates, documents,
statements and other information of the Corporation or representatives or
officers thereof.
We are attorneys admitted to practice in The Commonwealth of Massachusetts.
We express no opinion concerning the laws of any jurisdictions other than the
laws of the United States of America and the Maryland General Corporation Law as
in effect on the date hereof.
Based upon the foregoing, we are of the opinion that under the Maryland
General Corporation Law, pursuant to which the Corporation is incorporated, the
shares to be issued to the shareholders of the Trust in
<PAGE>
Maryland Property Capital Trust, Inc.
November 20, 1998
Page 2
connection with the Merger, when issued in accordance with the terms described
in the Merger Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us with respect to this opinion
under the heading "Legal Matters" in the Prospectus which is a part of such
Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
EXHIBIT 10.1
INVESTMENT AGREEMENT
by and among
Framingham York Associates Limited Partnership,
as
the Purchaser
and
Property Capital Trust
as
the Trust
and
Maryland Property Capital Trust, Inc.
as
the Company
Dated as of June 18, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. ISSUANCE AND SALE OF SHARES...................................................................... 1
Section 1.1 Issuance of Shares................................................................ 1
Section 1.2 Closing........................................................................... 2
ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS................................................. 2
Section 2.1 Existence; Power; Authorization................................................... 2
Section 2.2 Binding Agreement; No Violation................................................... 3
Section 2.3 Purchase for Purpose of Investment................................................ 3
Section 2.4 Accredited Investor Status........................................................ 3
Section 2.5 Legend............................................................................ 3
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE COMPANY...................................... 4
Section 3.1 Existence; Power; Authorization................................................... 4
Section 3.2 Binding Agreement; No Violation................................................... 4
Section 3.3 Consents and Approvals............................................................ 4
Section 3.4 Shares............................................................................ 5
Section 3.5 SEC Documents..................................................................... 5
Section 3.6 Financial Documents............................................................... 5
Section 3.7 No Litigation..................................................................... 5
Section 3.8 Subsidiaries...................................................................... 5
Section 3.9 Absence of Certain Changes or Events.............................................. 6
Section 3.10 No Undisclosed Liabilities........................................................ 6
Section 3.11 Capital Structure................................................................. 6
Section 3.12 Taxes............................................................................. 7
Section 3.13 No Default........................................................................ 8
Section 3.14 Solvency.......................................................................... 8
Section 3.15 Compliance with Laws.............................................................. 8
Section 3.16 No Restrictions on Equity Securities.............................................. 8
Section 3.17 Employee Benefit Plans............................................................ 9
Section 3.18 Debt Instruments.................................................................. 9
Section 3.19 Vote Required..................................................................... 9
Section 3.20 Transactions with Affiliates...................................................... 10
Section 3.21 Proxy Statement................................................................... 10
Section 3.22 REIT Qualification................................................................ 10
Section 3.23 No Other Agreements to Sell....................................................... 10
Section 3.24 Insurance......................................................................... 10
Section 3.25 Unlawful payments................................................................. 11
Section 3.26 Real Property..................................................................... 11
Section 3.27 Disclosure........................................................................ 12
ARTICLE 4. COVENANTS........................................................................................ 12
Section 4.1 Conduct of the Business of the Trust and the Company.............................. 12
Section 4.2 Proxy Statement; Special Meeting.................................................. 13
Section 4.3 Sale of Real Property............................................................. 14
</TABLE>
(i)
<PAGE>
<TABLE>
<S> <C>
Section 4.4 Other Actions..................................................................... 14
Section 4.5 Cooperation....................................................................... 14
Section 4.6 Public Announcements.............................................................. 14
Section 4.7 Government Filings................................................................ 15
Section 4.8 Listing of Shares................................................................. 15
Section 4.9 Registration of Shares............................................................ 15
Section 4.10 Option Plans; Options............................................................. 15
Section 4.11 Benefits Plans.................................................................... 15
Section 4.12 Rights Agreement.................................................................. 15
Section 4.13 Resignation of Trustees........................................................... 15
Section 4.14 Charter and By-laws of the Company................................................ 15
Section 4.15 FYA Merger Agreement and PCT LP Merger Agreement.................................. 15
Section 4.16 No Solicitation................................................................... 15
Section 4.17 Confidentiality................................................................... 16
Section 4.18 Time of Closing................................................................... 16
ARTICLE 5. CLOSING.......................................................................................... 16
Section 5.1 Deliveries at the Closing by the Purchasers....................................... 16
Section 5.2 Deliveries at the Closing by Trust and the Company................................ 16
ARTICLE 6. CONDITIONS PRECEDENT TO CLOSING.................................................................. 17
Section 6.1 Conditions to Obligations of the Purchasers....................................... 17
Section 6.2 Conditions to Obligations of the Trust and the Company............................ 18
ARTICLE 7. INDEMNIFICATION.................................................................................. 19
Section 7.1 Indemnification by the Trust and the Company...................................... 19
Section 7.2 Indemnification by the Purchasers................................................. 19
Section 7.3 Notice; Defense of Claims......................................................... 20
ARTICLE 8. NO BROKERS....................................................................................... 20
ARTICLE 9. TERMINATION...................................................................................... 20
Section 9.1 Termination....................................................................... 20
Section 9.2 Effect of Termination............................................................. 21
ARTICLE 10. NOTICE.......................................................................................... 21
ARTICLE 11. MISCELLANEOUS................................................................................... 22
Section 11.1 Survival of Representation and Warranties......................................... 22
Section 11.2 Entire Agreement; Succession and Assignment;
No Third Party Rights............................................................. 22
Section 11.3 Amendment......................................................................... 23
Section 11.4 Governing Law..................................................................... 23
Section 11.5 Headings.......................................................................... 23
Section 11.6 Severability...................................................................... 23
Section 11.7 Counterparts...................................................................... 23
Section 11.8 Construction...................................................................... 23
Section 11.9 Representatives................................................................... 23
Section 11.10 Expenses.......................................................................... 23
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C>
Section 11.11 Interpretation.................................................................... 24
Section 11.12 Exculpation....................................................................... 24
</TABLE>
(iii)
<PAGE>
SCHEDULES
Schedule 1.1 List of Purchasers
Schedule 3.8 Subsidiaries
Schedule 3.10 Undisclosed Liabilities
Schedule 3.11 Options/Deferred Shares
Schedule 3.16 Restrictions on Securities
Schedule 3.17 Employee Benefit Plans
Schedule 3.18(a) Defaults
Schedule 3.20 Transactions with Affiliates
Schedule 3.23 Agreements relating to properties or assets
Schedule 3.26 Environmental
Schedule 4.3 Permitted Investments
EXHIBITS
Exhibit A Form of Joinder
* Exhibit B Form of Real Property Sale Agreement
Exhibit C Form of Registration Rights Agreement
** Exhibit D Form of Charter of the Company
** Exhibit E Form of By-laws of the Company
Exhibit F Form of opinion of Paul, Weiss, Rifkind, Wharton & Garrison
____________
* Exhibit B has been omitted, but will be furnished supplementally to the
Securities and Exchange Commission upon request.
** The Charter of the Company and the By-laws of the Company have been filed
as Exhibits 3.1 and 3.2, respectively, to the Registration Statement on
Form S-4 of Maryland Property Capital Trust, Inc. filed with the Securities
and Exchange Commission on November 20, 1998.
(iv)
<PAGE>
INVESTMENT AGREEMENT
This INVESTMENT AGREEMENT (including all exhibits, hereinafter referred to
as this "Agreement") dated as of June 18, 1998 (the "Effective Date") is made
--------- --------------
and entered into by and among Framingham York Associates Limited Partnership, a
Massachusetts limited partnership ("FYA") (the "Purchaser" and, together with
--- ---------
all parties who execute a joinder to this Agreement in the form of Exhibit A
---------
attached hereto, the "Purchasers"), Property Capital Trust, a Massachusetts
----------
Business Trust (the "Trust"), and Maryland Property Capital Trust, Inc., a
-----
Maryland corporation (the "Company").
-------
RECITALS
A. The Trust is a Massachusetts business trust with transferable shares
of beneficial interest of the type described in Massachusetts General Laws,
Chapter 182, Section 1. The Company is a Maryland corporation and a wholly-owned
subsidiary of the Trust.
B. Pursuant to an Agreement and Plan of Merger entered into on the date
hereof by and between the Trust and the Company (the "PCT Merger Agreement"),
--------------------
the Trust will merge with and into the Company with the Company surviving (the
"PCT Merger").
- -----------
C. Subject to the consummation of the PCT Merger and the other conditions
stated herein, the Purchasers and the Company have each determined to enter into
this Agreement pursuant to which the Purchasers have agreed to purchase from the
Company, and the Company has agreed to issue and sell to the Purchasers, the
Shares at the Closing (each as defined herein).
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, do hereby agree as follows:
ARTICLE I
ISSUANCE AND SALE OF SHARES
1.1 Issuance of Shares. Upon the terms and subject to the conditions set
------------------
forth in this Agreement, and in reliance upon the representations and warranties
hereinafter set forth, on the Closing Date (as defined in Section 1.2), the
Company will issue, sell and deliver to the Purchasers, and the Purchasers will
purchase from the Company, (i) an aggregate of 331,671 shares (the "Initial
-------
Shares") of common stock of the Company, par value $.01 per share (the "Common
- ------ ------
Stock"), for an aggregate purchase price of one million one hundred thousand
- -----
dollars ($1,100,000) (the "Initial Purchase Price") and (ii) such number of
----------------------
shares (the "Additional Shares" and together with the Initial Shares, the
-----------------
"Shares") of Common Stock as determined by dividing (x) the aggregate amount of
- -------
cash paid to the shareholders of the Trust pursuant to Section 4.2(e) of the PCT
Merger Agreement by (y) $3.13, for an aggregate purchase price equal to the
amount paid to the shareholders of the Trust pursuant to Section 4.2(e) of the
PCT Merger Agreement (the "Fractional Shares Purchase Price" and, together with
--------------------------------
the Initial Purchase Price, the "Aggregate Purchase Price"). Subject to the
------------------------
provisions of Section 1.3, at the Closing (as defined in Section 1.2), each
Purchaser will purchase from the Company, and the Company will issue, sell and
deliver to such Purchaser, the number of shares set forth opposite such
Purchaser's name on Schedule 1.1 attached hereto and such Purchaser will deliver
------------
to the Company the portion of the Aggregate Purchase Price set forth opposite
such Purchaser's name on Schedule 1.1.
------------
<PAGE>
1.2 Closing.
-------
(a) The closing of the transactions contemplated by this Agreement
(the "Closing") shall take place at the offices of Goodwin, Procter & Hoar LLP,
-------
Exchange Place, Boston, MA 02109, 10:00 a.m. Boston, Massachusetts time, on the
business day of the satisfaction or concurrent satisfaction or, if permissible,
waiver of the conditions set forth in Sections 6.1 and 6.2 hereof (the "Closing
-------
Date") or at such other time and place as the parties may agree.
- ----
(b) At the Closing (i) the Company will deliver to each Purchaser a
certificate or certificates representing the Shares purchased by such Purchaser,
as set forth on Schedule 1.1, against payment of the portion of the Aggregate
------------
Purchase Price to be paid by such Purchaser, as set forth on Schedule 1.1,
------------
registered in the name of such Purchaser, together with the other documents and
certificates to be delivered pursuant to Section 6.1 hereof, and (ii) each
Purchaser, in full payment for the Shares purchased by such Purchaser, as set
forth on Schedule 1.1, will deliver to the Company an amount equal to the
------------
portion of the Aggregate Purchase Price to be paid by such Purchaser, as set
forth on Schedule 1.1, in immediately available funds by wire transfer to the
------------
account designated by the Company, or by such other means as may be agreed by
the parties, together with the other documents and certificates to be delivered
pursuant to Section 6.2 hereof.
1.3 Additional Purchasers. Notwithstanding anything else herein to the
---------------------
contrary, at any time following the execution of the Agreement, but prior to the
date on which the Proxy Statement (as defined in Section 4.2) is filed with the
Securities and Exchange Commission (the "SEC"), FYA may assign to one or more
---
third parties a portion of its investment commitment under the Agreement, and
all rights and obligations associated therewith; provided, however, that FYA may
-------- -------
not assign, in the aggregate, a portion of its investment commitment greater
than $100,000; and provided, further, that such assignment shall not relieve FYA
-------- -------
of its obligations hereunder. Any party to whom FYA assigns a portion of its
investment commitment, and all rights and obligations associated therewith, and
any party who purchases all or a portion of the Additional Shares shall execute
a joinder to the Agreement in the form of Exhibit A attached hereto. All
---------
references to "Purchasers" contained in the Agreement shall be deemed to refer
to any party who executes such a joinder and Schedule 1.1 shall be amended to
------------
reflect the execution of such a joinder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally with respect to itself, himself or herself and
not jointly, hereby represents and warrants to, and agrees with, the Company as
follows:
2.1 Existence; Power; Authorization. FYA is a limited partnership duly
-------------------------------
organized and in good standing under the laws of the Commonwealth of
Massachusetts and has all requisite partnership power and authority to execute
and deliver this Agreement and all other documents and instruments to be
executed and delivered by it hereunder, and to perform its obligations hereunder
and thereunder in accordance with the terms and conditions hereof and thereof.
The execution, delivery and performance by such Purchaser of this Agreement and
the other agreements and documents to be executed in connection with the
transactions contemplated hereunder (including, but not limited to, the
Agreement and Plan of Merger (the "PCT Merger Agreement") by and between the
--------------------
Company and the Trust, the Contribution and Merger Agreement (the "FYA Merger
----------
Agreement") by and between FYA and Beal Properties Pine Hill Limited
- ---------
Partnership, a Massachusetts limited partnership ("BPPH"), and the Contribution
----
and Merger Agreement (the "PCT LP Merger Agreement") by and between BPPH and
-----------------------
Property Capital Trust, L.P., a Massachusetts limited
2
<PAGE>
partnership ("PCT LP")) (collectively, the "Transaction Documents"), have been
------ ---------------------
duly authorized by all necessary action, including, for FYA, all necessary
action by the limited partners of FYA.
2.2 Binding Agreement; No Violation. Assuming the due and valid
-------------------------------
authorization, execution and delivery of this Agreement by the Trust and the
Company, this Agreement, and the other Transaction Documents, will be the legal,
valid and binding obligation of such Purchaser, enforceable against such
Purchaser in accordance with their respective terms, subject to applicable
bankruptcy, insolvency, moratorium or similar laws relating to creditors' rights
and general principles of equity. The performance by such Purchaser of its
duties and obligations under the Transaction Documents to be executed and
delivered by it hereunder will not (i) conflict with, or result in a breach of,
or default under, any provision of any of the organizational documents of such
Purchaser or any agreement, instrument, decree, judgment, injunction, order,
writ, law, rule or regulation, or any determination or award of any court or
arbitrator, to which such Purchaser is a party or by which its assets are or may
be bound, except for any of the foregoing matters that, individually or in the
aggregate, would not reasonably be expected to have a material adverse effect on
such Purchaser, or (ii) require any consent, approval or authorization of, or
declaration, filing or registration with, any domestic governmental or
regulatory authority, except where the failure to obtain any such consent,
approval or authorization of, or filing or registration with, any governmental
or regulatory authority would not reasonably be expected to have a material
adverse effect on the ability of such Purchaser to consummate or to perform its
obligations under the Transaction Documents to be executed and delivered by it
hereunder.
2.3 Purchase for Purpose of Investment. Such Purchaser is acquiring the
----------------------------------
Shares under this Agreement for its own account solely for the purpose of
investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act of 1933, as amended (the
"Securities Act"). Such Purchaser acknowledges that the shares of Common Stock
--------------
to be acquired by it or any other Purchaser have not been registered under the
Securities Act and may be sold or disposed of in the absence of such
registration only pursuant to an effective registration statement or any
exemption from such registration.
2.4 Accredited Investor Status. Such Purchaser is knowledgeable,
--------------------------
sophisticated and experienced in business and financial matters and fully
understands the limitations on transfer described in Section 2.3. Such
Purchaser, and in the case of FYA, each general and limited partner of such
Purchaser, is an "accredited investor" as such term is defined in Rule 501(a) of
Regulation D under the Securities Act.
2.5 Legend. Such Purchaser hereby acknowledges that each certificate
------
representing the Shares shall bear the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION
OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT AND THE RULES AND
REGULATIONS
3
<PAGE>
THEREUNDER AND UNDER APPLICABLE STATE SECURITIES OR "BLUE SKY LAWS."
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE TRUST AND THE COMPANY
The Trust and the Company hereby represent and warrant to, and agree with,
the Purchasers as follows:
3.1 Existence; Power; Authorization. The Trust is a business trust duly
-------------------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland.
Each of the Trust and the Company is duly authorized to transact business under
the laws of any state in which the character of the properties owned or leased
by it therein or in which the transaction of its business makes such
qualification necessary, except where the failure to be so qualified would not
have a material adverse effect on the Trust or the Company, has all requisite
power and authority to execute and deliver the Transaction Documents to be
executed and delivered by it hereunder, and to perform its obligations hereunder
and thereunder in accordance with the terms and conditions hereof and thereof.
The Board of Trustees of the Trust and the Board of Directors of the Company
have each approved the execution, delivery and performance of the Transaction
Documents to which it is a party and the consummation of the transactions
contemplated thereby.
3.2 Binding Agreement; No Violation. Assuming the due and valid
-------------------------------
authorization, execution and delivery of the Transaction Documents by the
parties other than the Trust and the Company, the Transaction Documents to be
executed and delivered by the Trust and the Company hereunder, when duly
executed and delivered, will be the legal, valid and binding obligation of each
of the Trust and the Company, enforceable against each of the Trust and the
Company in accordance with their respective terms, subject to (i) limitations
under applicable law on rights to indemnification, (ii) the effects of any
applicable bankruptcy, reorganization, moratorium or similar laws, and (iii)
general principles of equity. To the knowledge of the Company and the Trust,
the performance by the Trust and the Company of its respective duties and
obligations under the Transaction Documents will not (x) conflict with, or
result in a breach of, or default under, any provision of any of the
organizational documents of the Trust or the Company or any agreements,
instruments, decrees, judgments, injunctions, orders, writs, laws, rules or
regulations, or any determination or award of any court or arbitrator, to which
the Trust or the Company is a party or by which the assets of either are or may
be bound, except for any of the foregoing matters that, individually or in the
aggregate, would not have a material adverse effect on the Trust or the Company,
or (y) require any consent, approval or authorization of, or declaration, filing
or registration with, any domestic governmental or regulatory authority, except
for (a) such consents, approvals, authorizations, registrations or
qualifications as may be required under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), any applicable state securities laws or the rules
------------
of the American Stock Exchange or (b) where the failure to obtain such consent,
approval or authorization of, or filing or registration with, any governmental
or regulatory authority would not have a material adverse effect on the Trust or
the Company.
3.3 Consents and Approvals. To the knowledge of the Company and Trust, no
----------------------
consent, waiver, approval or authorization of any third party is required to be
obtained by the Company or the Trust in connection with the execution, delivery
and performance of this Agreement and the other Transaction Documents except (a)
the approval by the holders of two-thirds of the shares of beneficial interest
of the Trust, (b) any consent, waiver, approval or authorization of any third
party that shall have been satisfied
4
<PAGE>
prior to the Closing or (c) where the failure to obtain such consent, waiver,
approval or authorization would not have a material adverse effect on the Trust
or the Company.
3.4 Shares. The Shares to be issued to the Purchasers are duly authorized
------
and, when issued by the Company, will be fully paid and non-assessable, free and
clear of any mortgage, pledge, lien, encumbrance, security interest, claim or
rights of interest of any third party of any nature whatsoever. The form of
Share certificate to be used to evidence the Common Stock will be in due and
proper form and will comply with all applicable legal requirements.
3.5 SEC Documents. The Trust or the Company has caused to be delivered or
-------------
made available to the Purchasers copies of all registration statements and
related prospectuses and supplements filed by the Trust and declared effective
under the Securities Act since December 31, 1995 (the "SEC Documents") and will
-------------
cause to be delivered to the Purchasers copies of such additional documents as
may be filed by the Company or the Trust pursuant to the Securities Act or the
Exchange Act, on or prior to the Closing Date. As of their respective dates,
such SEC Documents were, and those additional documents filed between the
Effective Date and the Closing Date have been and will be, prepared and filed in
compliance with the rules and regulations promulgated by the SEC, and do not and
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein in order to make the statements
contained therein, in light of the circumstances under which they were made or
will be made, not misleading.
3.6 Financial Documents. The consolidated financial statements included
-------------------
in the SEC Documents have been prepared in accordance with generally accepted
accounting procedures ("GAAP") applied on a consistent basis during the period
----
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q) and present fairly (subject, in
the case of the unaudited statements, to normal, recurring year-end audit
adjustments) the consolidated financial position of the Trust and its
consolidated Subsidiaries at the dates thereof and the consolidated results of
operations and cash flows for the periods then ended. For purposes of this
Agreement, the terms "Subsidiary" and "Subsidiaries" shall mean (i) any entity
---------- ------------
of which the Trust or the Company (or other specified entity) shall own directly
or indirectly through a subsidiary, a nominee arrangement or otherwise (x) at
least a majority of the outstanding capital stock (or other shares of beneficial
interest) or (y) at least a majority of the partnership, joint venture or
similar interests, and (ii) any entity in which the Trust or the Company (or
other specified entity) is a general partner or joint partner.
3.7 No Litigation. To the knowledge of the Company or the Trust, no
-------------
action, suit, claim, investigation or proceeding, whether legal or
administrative or in mediation or arbitration, is pending or threatened, at law
or in equity, against the Trust or the Company before or by any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality which would prevent the Trust or the Company
from performing its respective obligations pursuant to this Agreement or which,
if determined adversely, would have a material adverse effect on the Trust or
the Company. To the knowledge of the Company or the Trust, there is no
outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting the Company
or the Trust, which in any such case would impair the ability of the Company or
the Trust to enter into and perform all of its obligations under the Transaction
Documents and the transactions contemplated thereby.
3.8 Subsidiaries. Except as set forth on Schedule 3.8, neither the Trust
------------ ------------
nor the Company has any Subsidiaries nor any interest or investment in any
partnership, trust or other entity or organization. Each Subsidiary of the Trust
or the Company listed on Schedule 3.8 has been duly organized, is validly
------------
existing and in good standing under the laws of the jurisdiction in which it was
organized, has the power
5
<PAGE>
and authority to own its properties and to conduct its business and is duly
registered, qualified and authorized to transact business and is in good
standing in each jurisdiction under the laws of any state in which the character
of the properties owned or leased by it therein or in which the transaction of
its business makes such qualification necessary, except where the failure to be
so qualified would not have a material adverse effect on the Trust, the Company
or such Subsidiary; all of the outstanding equity or other participating
interests of each Subsidiary listed on Schedule 3.8 have been duly authorized
------------
and validly issued, are fully paid and non-assessable.
3.9 Absence of Certain Changes or Events. Except as disclosed in the SEC
------------------------------------
Documents or as contemplated by the Transaction Documents, since December 31,
1997, (i) there has been no material adverse change in the financial condition,
results of operation or business of the Trust or the Company, whether or not
arising in the ordinary course of business, (ii) there have been no transactions
or acquisitions entered into by the Trust or the Company, which are material
with respect to such entity (including, but not limited to, the purchase or sale
of any interests in real property), (iii) there has been no dividend or
distribution of any kind declared, paid or made by the Trust or the Company on
any class of its capital stock and (iv) there has been no change in the capital
stock of the Trust or the Company or any increase in the indebtedness of the
Trust or the Company.
3.10 No Undisclosed Liabilities. Except as set forth on Schedule 3.10,
-------------------------- -------------
none of the Trust, the Company or any Subsidiary has any material liabilities or
obligations of any nature (whether absolute, accrued, contingent or otherwise)
required by GAAP to be disclosed and that are not set forth in the financial
statements contained in the SEC Documents except for current liabilities
incurred in the ordinary course of business.
3.11 Capital Structure.
-----------------
(a) As of the Effective Date, (i) the authorized capital stock of the
Trust consists of an unlimited number of shares of beneficial interest, no par
value per share; (ii) the authorized capital stock of the Company consists of
100 shares of common stock, par value $.01 per share; (iii) the issued and
outstanding shares of capital stock of the Trust consist of 9,584,220 shares of
beneficial interest, 144,900 shares of beneficial interest reserved for issuance
upon the exercise of options granted pursuant to the Trust's 1992 Employee Stock
Option Plan, and 52,000 shares of beneficial interest reserved for issuance upon
the exercise of options granted pursuant to the Trust's 1994 Stock Option Plan
for Non-Employee Trustees all as further set forth on Schedule 3.11, and (iv)
-------------
the issued and outstanding shares of capital stock of the Company consist of 100
shares of common stock, all of which are held by the Trust. Immediately prior
to the Closing, the Trust shall have merged into the Company and (i) the
authorized capital stock of the Company shall consist of 10,000,000 shares of
common stock, par value $.01, 5,000,000 shares of preferred stock, par value
$.01 per share, and 15,000,000 shares of excess stock, par value $.01 per share,
and (ii) the issued and outstanding shares of capital stock of the Company shall
consist of 159,737 shares of common stock. All outstanding shares of beneficial
interest of the Trust and shares of common stock of the Company are validly
issued, fully paid and non-assessable and have been offered and sold in
compliance with all applicable laws (including, without limitation, federal and
state securities laws). No shares of capital stock of the Trust or the Company
are reserved for any purpose other than (a) the transactions contemplated by
this Agreement, (b) as specifically set forth on Schedule 3.11, and (c) the
-------------
possible issuance of shares of Common Stock of the Company upon conversion of
certain partnership units to be issued pursuant to certain of the Transaction
Documents.
6
<PAGE>
(b) All options to purchase shares of beneficial interest of the Trust
as set forth on Schedule 3.11 have been canceled prior to the Effective Date,
-------------
such cancellation conditioned upon the consummation of the transactions
contemplated by this Agreement.
(c) There are no shares of beneficial interest, common stock or any
other equity security of the Trust or the Company issuable upon conversion or
exchange of any security of the Trust or the Company or any Subsidiary of either
of them. Other than pursuant to the Rights Agreement (the "Rights Agreement")
----------------
dated September 28, 1990 between the Trust and State Street Bank and Trust
Company, no shareholder of the Trust or the Company is entitled to any
preemptive or similar rights to subscribe for shares of capital stock of the
Trust or the Company. Prior to the execution of this Agreement, the Trustees of
the Trust shall exempt from the provisions of the Rights Agreement, the
Transaction Documents and all transactions contemplated by the Transaction
Documents. In addition, the Trustees of the Trust shall terminate the Rights
Agreement in accordance with its terms, such termination to be conditioned upon
and immediately following the Closing.
3.12 Taxes.
-----
(a) The Trust and the Company and each Subsidiary has paid or caused
to be paid all federal, state, local, foreign, and other taxes, and all
deficiencies, or other additions to tax, interest, fines and penalties
(collectively, "Taxes"), owed or accrued by it and due and payable through the
-----
date hereof, including, without limitation any taxes payable pursuant to
Sections 857(b), 860(c) and 4981 of the Internal Revenue Code of 1986, as
amended, (the "Code"), except where failure to pay would not have a material
----
adverse effect on the Trust, the Company or any Subsidiary.
(b) The Trust, the Company and each Subsidiary has timely filed all
federal, state, local and foreign tax returns (collectively "Tax Returns")
-----------
required to be filed by any of them through the date hereof, and all such
returns accurately set forth the amount of any Taxes relating to the applicable
period.
(c) The Trust, the Company and each Subsidiary has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, shareholder or
other party.
(d) The most recent financial statements contained in the SEC
Documents reflect adequate reserves for Taxes payable by the Trust, the Company
and each Subsidiary for all taxable periods and portions thereof through the
date of such financial statements.
(e) Since the date of the most recent financial statements included in
the SEC Documents, the Trust, the Company and each Subsidiary has not incurred
any liability for taxes under Sections 857(b), 860(c) or 4981 of the Code and
have made sufficient accrual for Taxes in accordance with GAAP with respect to
periods for which Tax Returns have not been filed.
(f) There are no outstanding agreements, waivers of arrangements
extending the statutory period of limitations applicable to any claim for, or
the period for the collection or assessment of, Taxes due from the Trust, the
Company or any Subsidiary for any taxable period and there have been no
deficiencies proposed, assessed or asserted for such Taxes.
7
<PAGE>
(g) No audit or other proceedings by any court, governmental or
regulatory authority or similar authority has occurred or been asserted and is
pending and none of the Trust, the Company or any Subsidiary has received notice
that any such audit or proceeding may be commenced.
(h) Except as required by GAAP, none of the Trust, the Company or any
Subsidiary have agreed to, or filed application for, and are not required to
make any changes or adjustment to the accounting method.
(i) There is no contract, agreement, plan or arrangement covering any
person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by the Trust, the Company or any Subsidiary
by reason of Section 280G of the Code.
3.13 No Default. None of the Trust, the Company or any Subsidiary of
----------
either of them is in default under, or in violation of, any provision of its
organizational documents.
3.14 Solvency. There does not exist in effect with respect to either the
--------
Trust or the Company nor has the Trust or the Company made (i) any general
assignment for the benefit of creditors, (ii) any voluntary petition in
bankruptcy, (iii) any involuntary petition by either of the Trust's or the
Company's creditors, or suffered the appointment of a receiver to take
possession of all, or substantially all, of the Trust's or the Company's assets,
(iv) any attachment or other judicial seizure of all, or substantially all, of
the Trust's or the Company's assets, (v) any admission in writing of its
inability to pay its debts as they come due or (vi) any offer of settlement,
extension or composition to its creditors generally.
3.15 Compliance with Laws.
--------------------
(a) To the knowledge of the Company or the Trust, none of the Company,
the Trust or any Subsidiary of either of them is in violation in any material
respects of any applicable laws, ordinances, rules and regulations, whether
federal, state or local, foreign, statutory or common, and neither the Company
nor the Trust has been informed of any material violation of any such laws,
rules or regulations which would have a material adverse effect on the operation
of the Company or the Trust.
(b) To the knowledge of the Company or the Trust, all material
notices, licenses, permits, certificates and other authorizations (collectively,
"Permits") required in connection with the current construction, use, occupancy,
-------
management, leasing and operation of the properties of the Company or the Trust,
or any Subsidiary of either of them, have been obtained. To the knowledge of
the Company or the Trust, neither the Company nor the Trust has received written
notice that it or any third party has taken any action that would (or failed to
take any action the omission of which would) result in the revocation of such
Permits, that would have a material adverse effect on the Company or the Trust
or the ownership or operation of the properties of either of them, that in each
case has not been cured or otherwise resolved to the satisfaction of such third
party.
3.16 No Restrictions on Equity Securities. Except as set forth on
------------------------------------
Schedule 3.16, there are no shareholders' agreements, voting trust agreements or
- -------------
other restrictive agreements relating to the sale or voting of the Shares.
8
<PAGE>
3.17 Employee Benefit Plans.
----------------------
(a) Except as disclosed in the SEC Documents or in Schedule 3.17,
-------------
since the date of the most recent audited financial statements included in the
SEC Documents, there has not been any adoption or amendment by the Trust or the
Company, or any Subsidiary of either of them, of any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other employee benefit
plan, arrangement or understanding (whether or not legally binding, or oral or
in writing) providing benefits to any current or former employee, officer or
director of the Trust, the Company or any Subsidiary of either of them, or any
person affiliated with the Trust or Company under section 414(b), (c), (m) or
(o) of the Code (collectively, "Benefit Plans").
-------------
(b) Except as described in the SEC Documents or in Schedule 3.17 or as
-------------
would not have a material adverse effect on the Trust or the Company, (a) all
Benefit Plans, including any such plan that is an "employee benefit plan" as
defined in section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), are in compliance with all applicable requirements of law,
-----
including ERISA and the Code, and (b) none of the Trust, the Company or any
Subsidiary of either of them has any liability or obligation with respect to any
such Benefit Plan, whether accrued, contingent or otherwise, or to the knowledge
of the Trust and the Company, are any such liabilities or obligations expected
to be incurred. Except as set forth in Schedule 3.17, the execution of, and
-------------
performance of the transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent event) constitute
an event under any Benefit Plan, policy, arrangement, or agreement or any trust
or loan that will or may result in any payment (whether of severance pay or
otherwise), acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect to any employee
or director. The only severance agreements or severance policies applicable to
the Trust, the Company or any Subsidiary of either of them are the agreement and
policies specifically referred to in Schedule 3.17.
-------------
3.18 Debt Instruments.
----------------
(a) None of the Trust, the Company or any Subsidiary of either of them
is in violation of or in default under (nor does there exist any condition which
upon the passage of time or the giving of notice or both would cause such a
violation of or default under) any material loan or credit agreement, note,
bond, mortgage, indenture, lease, permit, concession, franchise, license or any
other material contract agreement, arrangement or understanding, to which it is
a party or by which it or any of its properties or assets is bound, except as
set forth in Schedule 3.18(a) and except for violations or defaults that would
----------------
not, individually or in the aggregate, result in a material adverse effect to
the Trust or the Company.
(b) None of the Trust, the Company or any Subsidiary of either of them
is subject to any indebtedness. For purposes of this Agreement, "indebtedness"
------------
shall mean, with respect to any person, without duplication, (a) all
indebtedness of such person for borrowed money, whether secured or unsecured,
(b) all obligations of such person under conditional sale or other title
retention agreements relating to property purchased by such person, (c) all
capitalized lease obligations of such person, (d) all obligations of such person
under interest rate or currency hedging transactions (valued at the termination
value thereof) and (e) all guarantees of such person of any such indebtedness of
any other person.
3.19 Vote Required. The affirmative vote of at least two-thirds of the
-------------
outstanding shares of beneficial interest of the Trust and of at least a
majority of the outstanding shares of Common Stock of the Company are the only
votes of the holders of any class or series of the Trust's or Company's capital
stock
9
<PAGE>
necessary (under applicable law or otherwise) to approve this Agreement and the
transactions contemplated hereby.
3.20 Transactions with Affiliates. Except for such items set forth in
----------------------------
the SEC Documents, set forth in Schedule 3.20 is a list of all arrangements,
-------------
agreements, and contracts entered into by the Trust, the Company or any
Subsidiary of either of them with (i) any person who is an officer, director or
affiliate of the Trust, the Company or any Subsidiary of either of them, any
relative of any of the foregoing or any entity of which any of the foregoing is
an affiliate or (ii) any person who acquired securities of the Trust in a
private placement. Such documents, copies of all of which have previously been
delivered or made available to the Purchasers, are listed in Schedule 3.20.
-------------
3.21 Proxy Statement. None of the Proxy Statement (as defined in Section
---------------
4.2), if required under applicable law, or any other document filed or to be
filed by or on behalf of the Trust or the Company with the SEC or any other
governmental authority or any other document required to be prepared and
distributed in connection with the transactions contemplated hereby will contain
when filed, or shall contain, at the respective time filed with the SEC or other
governmental authority, and, in addition in the case of the Proxy Statement, if
required under applicable law, at the date it or any amendment or supplement
thereto is mailed to shareholders of the Trust or Company to solicit the vote of
such shareholders on the PCT Merger and the issuance of the Shares, any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading; provided that the
foregoing shall not apply to information supplied by the Purchasers in writing
specifically for inclusion or incorporation by reference in any such document.
The Proxy Statement, if required under applicable law, shall comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
3.22 REIT Qualification. For its taxable year ending July 31, 1989 and at
------------------
all times thereafter up to and including the date hereof, the Trust (i) has
qualified to be treated as a REIT within the meaning of Sections 856-860 of the
Code, including, without limitation, the requirements of Sections 856 and 857 of
the Code, (ii) has operated, and intends to continue to operate through the
Closing Date in such a manner as to qualify as a REIT for its taxable year
ending December 31, 1998 and (iii) has not taken or failed to take any action
which could result in a challenge to its status as a REIT and no such challenge
is pending or threatened. For the periods described in the preceding sentence,
the Trust has met all requirements necessary to be treated as a REIT for
purposes of the income tax provisions of those states in which the Trust is
subject to income tax and which provide for the taxation of a REIT in a manner
similar to the treatment of REITs under Sections 856-860 of the Code.
3.23 No Other Agreements to Sell. Except pursuant to the Transaction
---------------------------
Documents or as set forth on Schedule 3.23, neither the Trust nor the Company
-------------
has made any agreement with, nor will it enter into any agreement with, and it
does not have any obligation (absolute or contingent) to, any other person or
firm to sell, transfer or in any way encumber any of its properties or assets or
to enter into any agreement with respect to a sale, transfer or encumbrance of,
or put or call right with respect to, any of its properties or assets.
3.24 Insurance. The Trust and the Company, and the Subsidiaries of each
---------
of them, carry or are covered by, insurance in such amounts and covering such
risks as is adequate for the conduct of their respective business and the value
of their assets and as is customary for companies engaged in similar businesses
in similar industries; none of the Trust, the Company or any Subsidiary of
either of them has
10
<PAGE>
received from any insurance company notice of any material defects or
deficiencies affecting the insurability of any such assets and operations.
3.25 Unlawful payments. To the knowledge of the Trust and the Company,
-----------------
none of the Trust, the Company or any Subsidiary of either of them, nor any
director, officer, agent, employee or other person associated with or acting on
behalf of the Trust, the Company or any Subsidiary of either of them, has used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expense relating to political activity; made any direct or indirect
unlawful payment to any foreign or domestic government official or employee from
corporate funds; violated or is in violation of any provision of the Foreign
Corrupt Practices Act of 1977; or made any bribe, rebate, payoff, influence
payment, kickback or other unlawful payment.
3.26 Real Property. To the knowledge of the Trust and the Company, except
-------------
as disclosed in the Environmental Reports (as defined below) or on Schedule
--------
3.26, (i) the properties of the Trust and the Company are not in violation of
- ----
any Environmental Laws (as defined below), (ii) no written notices of any
violation or alleged violation of any Environmental Laws relating to such
properties or their use have been received by the Trust or the Company, whether
such notices relate to actions or omissions by the Trust or the Company or by a
prior owner, operator or occupant of the applicable property and (iii) there are
no writs, injunctions, decrees, orders or judgments outstanding or any claims,
actions, investigations or other proceedings, whether civil or criminal, at law
or in equity or before any arbitrator or governmental entity ("Environmental
-------------
Claims"), pending or threatened in writing, relating to any violation or alleged
- ------
violation of any Environmental Laws relating to such properties or their use,
except for violations or Environmental Claims that individually or in the
aggregate would not have a material adverse effect on the financial condition or
results of operations of the Trust or the Company.
For the purposes hereof:
"Environmental Laws" shall mean federal, state, local or administrative
------------------
agency ordinance, law, rule, regulation, order or requirement relating to
environmental conditions or Hazardous Material, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Sections 9601 et seq.; Resource Conservation and Recovery Act, 42 U.S.C.
-- ---
Sections 6901 et seq.; Federal Water Pollution Control Act, 33 U.S.C. Sections
-- ---
1251 et seq.; Clean Air Act, 42 U.S.C. Sections 7401 et seq.; Hazardous
-- --- -- ---
Materials Transportation Act, 49 U.S.C. Sections 1471 et seq.; Toxic Substances
-- ---
Control Act, 15 U.S.C. Sections 2601 et seq.; Refuse Act, 33 U.S.C. Sections 407
-- ---
et seq.; Emergency Planning and Community Right-To-Know Act, 42 U.S.C. Sections
- -- ---
11001 et seq.; and Occupational Safety and Health Act, 29 U.S.C. Sections 65 et
-- --- --
seq., to the extent it includes the emission of any Hazardous Material;
- ---
"Hazardous Material," shall mean any substance, chemical, waste or other
------------------
material which is listed, defined or otherwise identified as "hazardous" or
"toxic" under any Environmental Laws, including without limitation or any
regulation, order, rule or requirement adopted thereunder, as well as any
formaldehyde, urea, polychlorinated biphenyls, petroleum, petroleum product or
by-product, crude oil, natural gas, natural gas liquids, liquefied natural gas
or synthetic gas usable for fuel or mixture thereof, radon, asbestos and
"source," "special nuclear," and "by-product" material as defined in the Atomic
Energy Act of 1985, 42 U.S.C. Sections 3011 et seq.;
-- ---
"Environmental Reports," as used in this Agreement, shall mean written
---------------------
Phase I, Phase II or other similar environmental assessment reports, evidencing
the results of certain environmental assessments
11
<PAGE>
performed for the purpose of assessing the environmental condition of the
properties of the Trust or the Company, in the possession or control of the
Trust or the Company or its affiliates.
3.27 Disclosure. The representations, warranties and statements contained
----------
in this Agreement and in the Transaction Documents, and in the certificates,
exhibits and schedules delivered by the Company and the Trust to the Purchasers
pursuant to this Agreement or any of the Transaction Documents, do not contain
any untrue statement of a material fact, and, when taken together, do not omit
to state a material fact required to be stated therein or necessary in order to
make such representations, warranties or statements not misleading in light of
the circumstances under which they were made. There are no facts (other than
changes in general economic or market conditions) which presently or can
reasonably be expected to in the future have a material adverse effect on the
condition (financial or otherwise), properties, assets, liabilities, business,
operations or prospects of the Trust or the Company.
ARTICLE IV
COVENANTS
4.1 Conduct of the Business of the Trust and the Company. The Trust and
----------------------------------------------------
the Company covenant and agree that between the Effective Date and the Closing
Date, unless the Purchasers have consented (such consent not to be unreasonably
withheld, conditioned or delayed) in writing to any other act or omission, the
Trust and the Company shall perform or observe the following:
(a) The Company and the Trust shall, and shall cause each of its
Subsidiaries and affiliates to, conduct their operations according to their
usual, regular and ordinary course in substantially the same manner as
heretofore conducted.
(b) Neither the Company nor the Trust shall amend its respective
articles of incorporation, bylaws, declaration of trust or other charter
document, except as contemplated by the Transaction Documents.
(c) Neither the Company nor the Trust shall (except as required by the
Transaction Documents), issue any interests or shares of its capital stock,
effect any stock split, reverse stock split, stock dividend, recapitalization or
similar transaction.
(d) Neither the Company nor the Trust shall (i) declare, set aside or
pay any dividend or make any other distribution or payment with respect to any
shares of its capital stock (other than the distribution of the net proceeds
from the sale of the Cincinnati Property and cash on hand as of the Effective
Date or as contemplated by the Transaction Documents) or (ii) directly or
indirectly redeem, purchase or otherwise acquire any shares of its capital stock
or capital stock of any of its affiliates, or make any commitments for any such
action.
(e) Neither the Company nor the Trust shall, and shall not permit, any
of its respective Subsidiaries or their respective affiliates to, sell or
otherwise dispose of, except in the ordinary course or business, any of their
assets that are material, individually or in the aggregate (other than as
indicated on Schedule 3.23 or as otherwise contemplated by the Transaction
-------------
Documents).
(f) Neither the Company nor the Trust shall, and shall not permit any
of its respective Subsidiaries or affiliates to, make any loans, advances or
capital contributions to, or investments in, any
12
<PAGE>
unaffiliated third party other than contemplated by this Agreement or in the
ordinary course of business consistent with past practice.
(g) Neither the Company nor the Trust shall make any tax election
(unless required by law or necessary to preserve the Trust's or, following the
consummation of the transactions contemplated by the Transaction Documents, the
Company's status as a REIT or the status of any Subsidiary as a partnership for
federal income tax purposes).
(h) Neither the Company nor the Trust shall (i) change in any
material manner any of its methods, principles or practices of accounting in
effect at the Effective Date, or (ii) make or rescind any express or deemed
election relating to Taxes, settle or compromise any claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes, except in the case of settlements or compromises, relating to
Taxes on real property in an amount not to exceed, individually or in the
aggregate, $50,000, or change any of its methods of reporting income or
deductions for federal income tax purposes from those employed in preparation of
its federal income tax return for the most recently completed taxable year
except, in the case of clause (i), as may be required by the SEC, applicable law
or GAAP.
(i) Neither the Company nor the Trust shall, except as provided in
this Agreement, adopt any new employee benefit plan, incentive plan, severance
plan, stock option or similar plan, grant new stock appreciation rights or amend
any existing plan or rights, except such changes as are required by law.
(j) Neither the Company nor the Trust shall enter into or amend or
otherwise modify any agreement or arrangement with persons that are affiliates
or, as of the Effective Date, are executive officers, directors or Trustees of
the Company, the Trust or any Subsidiary.
(k) Neither the Company nor the Trust shall, and shall not permit any
of its respective Subsidiaries or affiliates to, pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the Trust's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 or incurred in the ordinary course of
business consistent with past practice or obligations referred to in Section 5.4
of the PCT Merger Agreement.
(l) Except as contemplated by the Transaction Documents, neither the
Company nor the Trust shall merge or consolidate with any person.
(m) Neither the Company nor the Trust shall, and shall not permit any
of their respective Subsidiaries or affiliates to, enter into any commitments
that, individually or in the aggregate, may result in total payments or
liability by or to the Company or the Trust in excess of $10,000, other than
commitments entered into in the ordinary course of business consistent with past
practice.
(n) The Trust shall and, following the consummation of the PCT Merger,
the Company, shall continue to qualify as a real estate investment trust for
federal income tax purposes.
4.2 Proxy Statement; Special Meeting. The Trust and the Company shall
--------------------------------
file with the SEC within forty-five (45) days of the Effective Date a proxy
statement (the "Proxy Statement") under the
---------------
13
<PAGE>
Exchange Act with respect to the Special Meeting (as defined below) and will
cause the Proxy Statement to comply as to form in all material respects with the
applicable provisions of the Exchange Act and the rules and regulations
promulgated thereunder. The Purchasers will cooperate with the Company in the
preparation of the Proxy Statement and to provide the Company with such
information as the Company may reasonably request. In connection with the
issuance of the Shares and the approval of the PCT Merger, the Trust, acting
through its Board of Trustees, shall, as required under and in accordance with
the regulations of the American Stock Exchange, duly call, give notice of,
convene and hold a special meeting of shareholders (the "Special Meeting") as
---------------
soon as practicable after the Proxy Statement is cleared by the SEC, for the
purpose of voting upon the approval of such issuance and the PCT Merger. The
Trust and the Company shall include in the Proxy Statement the recommendation of
its Board of Trustees and its Board of Directors, respectively, that
shareholders vote in favor of approval of such issuance and the PCT Merger.
4.3 Sale of Real Property.
---------------------
(a) In the event the Trust enters into an agreement relating to the
sale of land underlying the Cincinnati Marriott and the subordinate leasehold
mortgages thereon (the "Cincinnati Property") prior to the Closing, such
-------------------
agreement shall be substantially in the form of Exhibit B attached hereto. In
---------
the event such agreement is not substantially in the form of Exhibit B, the
---------
Purchasers must consent to the form of such agreement, such consent not to be
unreasonably withheld.
(b) In the event the sale of the Cincinnati Property is consummated
prior to the Closing, the Trust and the Company shall cause an amount equal to
$300,000 to be invested in one or more investments identified on Schedule 4.3
------------
attached hereto.
4.4 Other Actions. Each of the Purchasers, on the one hand, and the
-------------
Company and the Trust, on the other hand, shall not take, and shall use
commercially reasonable efforts to cause its respective Subsidiaries to refrain
from taking, any action that would result in (i) any of the representations and
warranties of such party set forth in this Agreement that are qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that are not so qualified becoming untrue in any material respect or (iii) any
of the conditions precedent to Closing set forth in Article 6 not being
satisfied.
4.5 Cooperation. Subject to the terms and conditions herein provided, the
-----------
parties to this Agreement shall (a) use their best efforts to cooperate with
each other in (i) determining which filings are required to be made prior to the
Closing Date with, and which consents, approvals, permits or authorizations are
required to be obtained prior to the Closing Date from governmental authorities
and (ii) timely making all such filings and timely seeking all such consents,
approvals, permits or authorizations; (b) use their best efforts to obtain in
writing any consents required from third parties necessary to effectuate the
transactions contemplated hereby; and (c) use their best efforts to take, or
cause to be taken, all other actions and do, or cause to be done, all other
things necessary, proper or appropriate to consummate and make effective the
transactions contemplated by this Agreement. If, at any time after the Closing
Date, any further action is necessary or desirable to carry out the purpose of
this Agreement, the proper officers and directors and other duly authorized
representatives of the parties shall take all such necessary action.
4.6 Public Announcements. The initial press release relating to this
--------------------
Agreement shall be a joint press release, approved by all parties and thereafter
the parties shall, subject to their respective legal obligations (including
requirements of stock exchanges and similar regulating bodies), consult with
each other, and use reasonable efforts to agree upon the text of any press
release, before issuing any such press release or otherwise making public
statements with respect to the transactions contemplated hereby and in
14
<PAGE>
making any filing with any federal or state governmental or regulatory agency of
with any national securities exchange with respect thereto.
4.7 Government Filings. The Company shall use its best efforts to make,
------------------
prior to the Closing Date, all necessary filings with all governmental
authorities to carry out the transactions contemplated by this Agreement and
will pay, subject to Section 11.10, all expenses incident thereto.
4.8 Listing of Shares. Subject to the consent of the American Stock
-----------------
Exchange regarding continued listing of the Company's Shares, the Company shall,
as promptly as practicable following the Effective Date, prepare and file with
the American Stock Exchange a listing application covering the Shares to be
issued hereunder and shall use its reasonable commercial efforts to obtain,
prior to the Closing Date, approval of the listing of such Shares, subject to
official notice of issuance. The obligations of this Section 4.8 shall survive
the Closing.
4.9 Registration of Shares. The Company and the Purchasers shall enter
----------------------
into a registration rights agreement (the "Registration Rights Agreement"),
-----------------------------
substantially in the form of Exhibit C, on or prior to the Closing Date.
---------
4.10 Option Plans; Options. The Trust shall terminate all stock option
---------------------
plans and deferred compensation plans, including without limitation, the Trust's
1992 Employee Stock Option Plan and the Trust's 1994 Stock Option Plan for Non-
Employee Trustees and all options outstanding under such plans shall be
canceled.
4.11 Benefits Plans. Subject to applicable law, the Trust shall take all
--------------
action necessary to cause all Benefit Plans identified on Schedule 3.17 to
-------------
terminate as of the Closing.
4.12 Rights Agreement. The Trustees shall take all action necessary to
----------------
cause the Rights Agreement to terminate immediately following the Closing.
4.13 Resignation of Trustees. The Trust shall accept the resignation of
-----------------------
all of the Trustees of the Trust, effective upon the consummation of the PCT
Merger.
4.14 Charter and By-laws of the Company. The Company shall amend and
----------------------------------
restate its charter and by-laws substantially in the form attached hereto as
Exhibit D and Exhibit E, respectively.
- --------- ---------
4.15 FYA Merger Agreement and PCT LP Merger Agreement. Each of the General
------------------------------------------------
Partners of FYA shall recommend that the limited partners of FYA vote in favor
of approval of the FYA Merger Agreement. The General Partner of BPPH shall
recommend that the limited partners of BPPH vote in favor of (i) approval of the
FYA Merger Agreement and (ii) approval of the PCT LP Merger Agreement. Such
General Partners shall use commercially reasonable efforts in making such
recommendations.
4.16 No Solicitation. Except with respect to the properties that are
---------------
listed on or are the subject of the agreements identified on Schedule 3.23 and
-------------
pursuant to the Transaction Documents, neither the Trust nor the Company shall
directly or indirectly, enter into, solicit, initiate or continue any
discussions or negotiations with, or encourage or respond to any inquiries or
proposals by, or participate in any negotiations with, or provide any
information to, or otherwise cooperate in any other way with, any person or
entity concerning any sale of all or a portion of the Company's or Trust's
assets, or any merger, consolidation, liquidation, dissolution or similar
transaction involving the Company or the Trust.
15
<PAGE>
4.17 Confidentiality. The Purchasers shall ensure that all confidential
---------------
information which each such party or any of its respective representatives may
now possess or may hereafter create or obtain relating to the Company or the
Trust, the transactions contemplated hereby or the financial condition, results
of operations, business, properties, assets, liabilities or future prospects of
the Company or the Trust, shall not be published, disclosed or made accessible
by any of them without the prior written consent of the Company and the Trust;
provided, however, that the restrictions of this sentence shall not apply: (i)
- -------- -------
to the extent the disclosure may otherwise be required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange or (ii) to the extent such information shall have otherwise
become publicly available.
4.18 Time of Closing. Each of the parties hereto shall use its best
---------------
efforts to consummate the transactions contemplated hereby on or prior to the
Closing Date.
4.19 Additional Property Acquisitions. The parties acknowledge that,
--------------------------------
pursuant to the FYA Merger Agreement and the PCT LP Merger Agreement, each of
which shall have been executed prior to Closing, PCT LP will own certain real
properties. The parties understand that affiliated parties of the Purchasers
may wish, prior to Closing, to enter into agreements with the appropriate
entities to contribute, following the Closing, additional real properties to PCT
LP in exchange for the issuance of units of partnership interest in PCT LP. The
Trust and the Company agree that they will not unreasonably withhold their
consent to such contribution and will negotiate in good faith with any such
parties with respect to the terms and conditions of such potential contributions
on a basis comparable to the terms and conditions of the Transaction Documents.
ARTICLE V
CLOSING
5.1 Deliveries at the Closing by the Purchasers. At the Closing, the
-------------------------------------------
Purchasers will deliver or cause to be delivered to the Company the following
and, where appropriate, duly executed on behalf of all necessary parties thereto
other than the Trust and the Company:
(a) The Aggregate Purchase Price as described in Section 1.2.
(b) Affidavits and other instruments, including but not limited to
all organizational documents of the Purchasers and their general partners, as
applicable, including partnership agreements, operating agreements, bylaws,
articles of incorporation and certificates of good standing and/or existence
reasonably requested by the Company evidencing the power and authority of such
entities to enter into and perform this Agreement and any documents to be
delivered hereunder.
(c) A certificate executed by each Purchaser, or a duly authorized
representative of such Purchaser, as applicable, stating that the
representations and warranties made by such Purchaser in this Agreement are true
and correct in all material respects as of the Closing Date, or if there have
been any changes, a description thereof.
(d) Such other documents as may be reasonably required or appropriate
to effectuate the consummation of the transactions contemplated by this
Agreement.
5.2 Deliveries at the Closing by Trust and the Company. At the Closing,
--------------------------------------------------
the Trust and the Company shall deliver or cause to be delivered by authorized
officers of the Trust and the Company to the
16
<PAGE>
Purchasers the following and, where appropriate, duly executed by all necessary
parties thereto other than the Purchasers:
(a) The certificates representing Shares to be issued at the Closing
properly issued to the appropriate party.
(b) A certificate executed by a duly authorized representative of
each of the Trust and the Company, executed on behalf of such entity and not
individually, stating that the representations and warranties made by the Trust
and the Company in this Agreement are true and correct in all material respects
as of the Closing Date, or if there have been any changes, a description
thereof.
(c) Affidavits and other instruments, including but not limited to
all organizational documents of the Trust and the Company including Declaration
of Trust, articles of organization, and certificates of good standing and
existence, reasonably requested by the Purchasers evidencing the power and
authority of the Trust and the Company to enter into and perform this Agreement
and any documents to be delivered hereunder.
(d) An opinion from Paul, Weiss, Rifkind, Wharton & Garrison, dated
as of the Closing Date, in the form attached hereto as Exhibit F. In rendering
such opinion, Paul, Weiss, Rifkind, Wharton & Garrison may require and rely upon
customary assumptions, representations and covenants including those contained
in certificates of officers of the Trust and others, reasonably satisfactory in
form and substance to such counsel. Such opinion shall include a provision that
expressly permits counsel for the Company to rely on such opinion on and after
the Closing Date.
(e) The Registration Rights Agreement pursuant to Section 4.9.
(f) Such other documents as may be reasonably required or appropriate
to effectuate the consummation of the transactions contemplated by this
Agreement.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 Conditions to Obligations of the Purchasers. The obligations of the
-------------------------------------------
Purchasers to pay the Aggregate Purchase Price and to perform the other
covenants and obligations to be performed by the Purchasers on the Closing Date
shall be subject to satisfaction of the following conditions (all or any of
which may be waived, in whole or in part, by the Purchasers):
(a) The representations and warranties made by the Trust and the
Company herein shall be true and correct in all material respects with the same
force and effect as though such representations and warranties had been made on
and as of the Closing Date; provided, however, that a failure of any
representations or warranties to be true and correct in all material respects
shall not give rise to a claim or right of termination by the Purchasers
hereunder so long as such matters do not have a material adverse effect on the
transactions contemplated herein.
(b) The Trust and the Company shall have executed and delivered to
the Purchasers all of the items and documents provided herein for said delivery.
17
<PAGE>
(c) The Trust and the Company shall have performed all covenants and
obligations undertaken by the Trust and the Company herein in all material
respects and materially complied with all conditions required by this Agreement
to be performed or complied with by them on or before the Closing Date.
(d) The Trust shall have been taxed as a real estate investment trust
in its most recent federal income tax return, shall be in compliance with all
applicable laws, rules and regulations, including the Code, necessary to permit
it to be so taxed and the statements set forth in subsection (i), (ii) and (iii)
of Section 3.22 shall be true and correct through the Closing Date. The Trust
shall not have taken any action or have failed to take any action which could be
expected to, alone or in conjunction with any other factors, result in the loss
of its (or following the consummation of the transactions contemplated by the
Transaction Documents, the Company's) status as a real estate investment trust
for federal income tax purposes.
(e) Except those actions contemplated by the Transaction Documents,
including, but not limited to, the consummation of any agreement listed on
Schedule 3.23, from the date of this Agreement through the Closing Date, there
- -------------
shall not have occurred any changes concerning the Trust or the Company that,
when combined with all other changes, have had or would reasonably be expected
likely to have a material adverse effect on the Trust or the Company.
(f) The charter and by-laws of the Company in effect immediately
prior to the Closing shall be substantially the charter and by-laws attached
hereto as Exhibit D and Exhibit E, respectively .
--------- ---------
(g) The following agreements shall have been terminated in accordance
with their terms and no party shall have any further rights or obligations
thereunder: (i) Incentive Compensation Agreement made as of August 25, 1995 by
and between the Trust and Robert M. Melzer, Termination Agreement made as of
October 19, 1992 by and between the Trust and Robert M. Melzer, as amended; (ii)
Termination Agreement made as of October 19, 1992 by and between the Trust and
William A. Bonn, as amended; and (iii) Subcontract and Option Agreement made as
of August 1, 1992 by and between PCA Institutional Investors and the Trust.
(h) All conditions to closing set forth in Article 5 of the PCT
Merger Agreement as in effect on the date hereof shall have been satisfied;
provided, however, that no such conditions shall have been waived by either
party to such agreement without the consent of the Purchasers.
(i) The partners of FYA and BPPH shall have approved, pursuant to the
terms of their respective partnership agreements, the FYA Merger Agreement and
the partners of BPPH shall have approved, pursuant to the terms of its
partnership agreement, the PCT LP Merger Agreement and such partners shall have
executed the necessary addendums to such agreements.
(j) Articles of Merger to effect the PCT Merger shall have been filed
with and accepted for recording by the Department of Assessments and Taxation of
the State of Maryland or as otherwise required under the Maryland General
Corporation Law.
6.2 Conditions to Obligations of the Trust and the Company. The
------------------------------------------------------
obligations of the Company to issue the Shares and the Trust's and the Company's
obligation to perform the other covenants and obligations to be performed by the
Trust and the Company on the Closing Date shall be subject to satisfaction of
the following conditions (all or any of which may be waived, in whole or in
part, by the Trust and the Company):
18
<PAGE>
(a) The representations and warranties made by the Purchasers herein
shall be true and correct in all material respects with the same force and
effect as though such representations and warranties had been made on and as of
the Closing Date; provided, however, that a failure of a representation or
warranty to be true and correct in all material respects shall not give rise to
a claim or right of termination by the Trust or the Company hereunder so long as
such matters do not have a material adverse effect on the transactions
contemplated herein.
(b) The Purchasers shall have performed all covenants and obligations
undertaken by the Purchasers herein in all material respects and materially
complied with all conditions required by this Agreement to be performed or
complied with by them on or before the Closing Date.
(c) From the date of this Agreement through the Closing Date, there
shall not have occurred any changes concerning the Purchasers that, when
combined with all other changes, have had or would reasonably be expected likely
to have a material adverse effect on the Purchasers.
(d) The Purchasers shall have executed and delivered to the Trust and
the Company all of the items and documents provided herein for said delivery.
(e) Articles of Merger to effect the PCT Merger shall have been filed
with and accepted for recording by the Department of Assessments and Taxation of
the State of Maryland or as otherwise required under the Maryland General
Corporation Law.
(f) Since December 31, 1997, there shall not have occurred any
material adverse change to FYA's financial condition, results of operation or
otherwise that would materially impair the ability of FYA to perform its
obligations hereunder.
(g) The PCT Merger Agreement shall have been approved by the holders
of two-thirds of the shares of beneficial interest of the Trust.
ARTICLE 7
INDEMNIFICATION
7.1 Indemnification by the Trust and the Company. The Trust and the
--------------------------------------------
Company jointly and severally agree subsequent to the Closing to indemnify and
hold the Purchasers and their respective Subsidiaries and affiliates and persons
serving as officers, directors, partners, stockholders or employees thereof
(individually a "Purchaser Indemnified Party" and collectively the "Purchaser
--------------------------- ---------
Indemnified Parties") harmless from and against any damages, liabilities, losses
- -------------------
(including, without limitation, diminution in value), taxes, fines, penalties,
costs, and expenses (including, without limitation, reasonable fees of counsel)
of any kind or nature whatsoever (whether or not arising out of third-party
claims and including all amounts paid in investigation, defense or settlement of
the foregoing), which may be sustained or suffered by any of them arising out of
or based upon any breach of any representation, warranty or covenant of the
Company or the Trust under this Agreement or under any other Transaction
Document, or in any certificate, schedule or exhibit delivered pursuant hereto
or thereto, or by reason of any claim, action or proceeding asserted or
instituted growing out of any matter or thing constituting such a breach.
7.2 Indemnification by the Purchasers. Each Purchaser agrees to indemnify
---------------------------------
and hold the Company and the Trust and their respective trustees, directors,
officers, employees, agents and shareholders (in connection with the affairs of
the Trust) harmless from and against any damages, liabilities, losses, taxes,
fines, penalties, costs and expenses (including, without limitation, reasonable
fees of counsel) of any
19
<PAGE>
kind or nature whatsoever (whether or not arising out of third-party claims and
including all amounts paid in investigation, defense or settlement of the
foregoing) which may be sustained or suffered by the Company or the Trust
arising out of or based upon any breach of any representation, warranty or
covenant made by such Purchaser in this Agreement or in any agreement, document
or instrument contemplated hereby, or in any certificate, schedule or exhibit
delivered pursuant hereto or thereto, or by reason of any claim, action or
proceeding asserted or instituted growing out of any matter or thing
constituting such a breach.
7.3 Notice; Defense of Claims. An indemnified party may make claims for
-------------------------
indemnification hereunder by giving written notice thereof to the indemnifying
party within the period in which indemnification claims can be made hereunder.
If indemnification is sought for a claim or liability asserted by a third party,
the indemnified party shall also give written notice thereof to the indemnifying
party promptly after it receives notice of the claim or liability being
asserted, but the failure to do so shall not relieve the indemnifying party from
any liability except to the extent that it is prejudiced by the failure or delay
in giving such notice. Such notice shall summarize the bases for the claim for
indemnification and any claim or liability being asserted by a third party.
Within twenty (20) days after receiving such notice the indemnifying party shall
give written notice to the indemnified party stating whether it disputes the
claim for indemnification and whether it will defend against any third party
claim or liability at its own cost and expense. If the indemnifying party fails
to give notice that it disputes an indemnification claim within twenty (20) days
after receipt of notice thereof, it shall be deemed to have accepted and agreed
to the claim, which shall become immediately due and payable. The indemnifying
party shall be entitled to direct the defense against a third party claim or
liability with counsel selected by it (subject to the consent of the indemnified
party, which consent shall not be unreasonably withheld) as long as the
indemnifying party is conducting a good faith and diligent defense. The
indemnified party shall at all times have the right to fully participate in the
defense of a third party claim or liability at its own expense directly or
through counsel; provided, however, that if the named parties to the action or
-------- -------
proceeding include both the indemnifying party and the indemnified party and the
indemnified party is advised that representation of both parties by the same
counsel would be inappropriate under applicable standards of professional
conduct, the indemnified party may engage separate counsel at the expense of the
indemnifying party. If no such notice of intent to dispute and defend a third
party claim or liability is given by the indemnifying party, or if such good
faith and diligent defense is not being or ceases to be conducted by the
indemnifying party, the indemnified party shall have the right, at the expense
of the indemnifying party, to undertake the defense of such claim or liability
(with counsel selected by the indemnified party), and to compromise or settle
it, exercising reasonable business judgment. If the third party claim or
liability is one that by its nature cannot be defended solely by the
indemnifying party, then the indemnified party shall make available such
information and assistance as the indemnifying party may reasonably request and
shall cooperate with the indemnifying party in such defense, at the expense of
the indemnifying party.
ARTICLE VIII
NO BROKERS
The Purchasers, the Trust and the Company covenant and agree one with the
other that no real estate commissions, finders' fees or brokers' fees have been
or will be incurred in connection with this Agreement or the transaction
contemplated hereby.
20
<PAGE>
ARTICLE IX
TERMINATION
Section 9.1 Termination. At any time prior to the Closing, this
-----------
Agreement may be terminated as follows:
(a) by mutual written consent of all of the parties to this
Agreement;
(b) by the Purchasers, pursuant to written notice by the Purchasers
to the Company, if (i) the Trust or the Company has failed to consummate the
transactions contemplated by the Transaction Documents by the later of (x)
September 30, 1998 and (y) following notice to the Trust and the expiration of a
ten (10) day period; (ii) all other conditions to Closing, other than any
condition within the control of the Company, have been satisfied or waived by
the party entitled to waive the same; and (iii) the Purchasers have not (x)
breached any representation or warranty contained herein or in any of the
Transaction Documents except for such breaches that would not, individually or
in the aggregate with any other such breaches, have a material adverse effect or
(y) failed to comply in all material respects with the covenants and agreements
required to be complied with by the Purchasers pursuant to the Transactions
Documents;
(c) by the Trust, pursuant to written notice by the Trust to the
Purchasers, if (i) the Purchasers have failed to consummate the transactions
contemplated by the Transaction Documents by the later of (x) September 30, 1998
and (y) following notice to the Purchasers and the expiration of a ten (10) day
period; (ii) all other conditions to Closing, other than any condition within
the control of the Purchasers, have been satisfied or waived by the party
entitled to waive the same; and (iii) neither the Trust nor the Company has (x)
breached any representation or warranty contained herein or in any of the
Transaction Documents except for such breaches that would not, individually or
in the aggregate with any other such breaches, have a material adverse effect,
or (y) failed to comply in all material respects with the covenants and
agreements required to be complied with by the Trust and the Company pursuant to
the Transaction Documents; or
(d) by the Trust or the Purchasers, if FYA shall have failed to
obtain any required approvals under its partnership agreement and/or BPPH shall
have failed to obtain any required approvals under its partnership agreement.
Section 9.2 Effect of Termination. In the event of termination pursuant
---------------------
to this Article 9, the rights and obligations of the parties under this
Agreement shall cease; provided, however, that the provisions of Section 4.6 and
-------- -------
Section 11.10 shall survive such termination. Notwithstanding anything herein
to the contrary, (i) if this Agreement is terminated pursuant to Section 9.1(c),
then promptly following such termination, the Purchasers shall pay to the Trust,
in addition to any amounts payable pursuant to Section 11.10, an amount equal to
$250,000 (the "Termination Fee") as liquidated damages hereunder, (ii) if this
Agreement is terminated pursuant to Section 9.1(b), then promptly following such
termination, the Trust and the Company shall pay to the Purchasers the
Termination Fee as liquidated damages hereunder, and (iii) if this Agreement is
terminated pursuant to Section 9.1(d), then promptly following such termination,
the Purchasers shall pay to the Trust the Termination Fee as liquidated damages.
The parties hereto expressly acknowledge and agree that, with respect to any
termination of this Agreement pursuant to Section 9.1(d), the payment of any
amount pursuant to Clause (iii) of this Section shall constitute liquidated
damages with respect to any claim for damages or any other claim which the Trust
would otherwise be entitled to assert against any of the Purchasers with respect
to this Agreement and the transactions contemplated hereby and shall constitute
the sole and exclusive remedy available to the Trust.
21
<PAGE>
ARTICLE X
NOTICE
All notices, demands, requests, or other writings in this Agreement
provided to be given, made or sent, or which may be given, made or sent, by
either party hereto to the other, shall be in writing and shall be delivered by
depositing the same with any nationally recognized overnight delivery service,
or by telecopy or fax machine, in either event with all transmittal fees
prepaid, properly addressed, and sent to the following addresses:
If to the Trust
or the Company: Property Capital Trust
101 Federal Street
Boston, MA 02110
Fax: (617) 737-0228
Attn: Robert M. Melzer
with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019-6064
Fax: (617) 373-2771
Attn: Walter F. Leinhardt
If to the Purchasers: The Beal Companies
177 Milk Street
Boston, MA 02109-3410
Fax: (617) 451-1801
Attn: Bruce A. Beal
with a copy to: Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Fax: (617) 523-1231
Attn: David P. Ries, P.C.
or to such other address as either party may from time to time designate by
written notice to the other. Notices given by (i) overnight delivery service as
aforesaid shall be deemed received and effective on the first business day
following such dispatch and (ii) telecopy or fax machine shall be deemed given
at the time and on the date of machine transmittal provided same is sent prior
to 5:00 p.m., Boston, Massachusetts time, on a business day (if sent later, then
notice shall be deemed given on the next business day) and if the sending party
receives a written send confirmation on its machine and forwards a copy thereof
by regular mail accompanied by such notice or communication. Notices may be
given by counsel for the parties described above, and such notices shall be
deemed given by said party, for all purposes hereunder.
22
<PAGE>
ARTICLE XI
MISCELLANEOUS
11.1 Survival of Representation and Warranties. Unless otherwise
-----------------------------------------
expressly provided herein, the representations and warranties in this Agreement
or in any instrument delivered pursuant to this Agreement shall survive the
Closing Date for a period of one (1) year.
11.2 Entire Agreement; Succession and Assignment; No Third Party
-----------------------------------------------------------
Rights. This Agreement (including the documents referred to herein) constitutes
- ------
the entire agreement between the parties and supersedes any prior
understandings, agreements, or representations by or between the parties,
written or oral, to the extent they related in any way to the subject matter
hereof. This Agreement shall be binding upon and inure to the benefit of the
parties named herein and their respective successors and permitted assigns. No
party may assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the other Party.
Nothing in this Agreement, express or implied, is intended to confer upon any
other person any rights or remedies of any nature whatsoever under or by reason
of this Agreement.
11.3 Amendment. No amendment of any provision of this Agreement
---------
shall be valid unless the same shall be in writing and signed by each party
hereto.
11.4 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of The Commonwealth of Massachusetts
without giving effect to any choice or conflict of law provision or rule
(whether of the Commonwealth of Massachusetts or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the
Commonwealth of Massachusetts.
11.5 Headings. The section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.6 Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
11.7 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
11.8 Construction. All references herein to any Section, or Exhibit
------------
shall be to the Sections of this Agreement and to the Exhibits annexed hereto
unless the context clearly dictates otherwise. All of the Exhibits annexed
hereto are, by this reference, incorporated herein.
11.9 Representatives. Any approval, consent, mutual satisfaction or
---------------
similar determination required to be made hereunder by the Purchasers or any
person included within such term shall be granted exclusively by any one of the
"Purchaser Representatives," who for purposes of this Agreement, until further
-------------------------
notice to the Company Representative, shall be Bruce A. Beal and Robert L. Beal.
Any approval, consent, mutual satisfaction or similar determination required to
be made hereunder by the Company or the Trust shall be granted exclusively by
the "Company Representative," who for purposes of this Agreement, until further
----------------------
notice to the Purchaser Representatives, shall be Robert M. Melzer.
23
<PAGE>
11.10 Expenses.
--------
(a) Except as set forth in subparagraph (b), each of the
parties hereto will pay all fees and expenses incurred by such party in
connection with this Agreement and the other Transaction Documents and the
transactions contemplated hereunder and thereunder.
(b) The Purchasers agree to reimburse the Trust for all
reasonable legal expenses (excluding legal expenses relating to any litigation
between any of the Purchasers and the Company or Trust relating to this
Agreement, the other Transaction Documents or any transaction contemplated
hereunder or thereunder) incurred by the Trust prior to the termination of this
Agreement pursuant to Article 9, whether or not the transactions contemplated by
this Agreement or the other Transaction Documents are consummated.
Notwithstanding the foregoing, the Purchasers shall in no event be obligated to
the Trust for legal expenses exceeding $150,000. In connection with the
obligation of the Purchasers under this Section 11.10, Beal Properties Inc. has
deposited $100,000 in an account designated by the Trust for the purpose of
satisfying all or a portion of such obligation. In the event legal expenses of
the Trust are less than $100,000 as of the earlier of (i) the termination of
this Agreement pursuant to Article 9 and (ii) the consummation of the
transactions contemplated under this Agreement, the Trust shall cause any
remaining funds to be returned promptly to Beal Properties Inc.
The provisions of this Section 11.10(b) shall survive the Closing.
11.11 Interpretation. Whenever used herein, the singular number
--------------
shall include the plural, the plural shall include the singular, and the use of
any gender shall be applicable to all genders.
11.12 Exculpation. The parties to this Agreement acknowledge and
-----------
agree that the obligations of the Trust hereunder do not and shall not
constitute personal obligations of the Trustees, officers, employees or
shareholders of the Trust, or any of them, and shall not involve any claim
against or personal liability on any of them, and the parties to this Agreement
agree to look only to the assets of the Trust in respect thereof and not to seek
recourse against such Trustees, officers, employees or shareholders or any of
them or their personal assets for such satisfaction.
Remainder of Page Intentionally Left Blank
24
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
PURCHASERS: FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
By: /s/ Bruce A. Beal
-----------------------------------------
Bruce A. Beal, as General Partner
By: /s/ Robert L. Beal
-----------------------------------------
Robert L. Beal, as General Partner
TRUST: PROPERTY CAPITAL TRUST
By: /s/ Robert M. Melzer
-----------------------------------------
Robert M. Melzer, President and
Chief Executive Officer
COMPANY: MARYLAND PROPERTY CAPITAL
TRUST, INC.
By: /s/ Bruce A. Beal
-----------------------------------------
Bruce A. Beal, President
25
<PAGE>
SCHEDULES
---------
SCHEDULE 1.1
- ------------
Purchasers
Framingham York Associates Limited Partnership
26
<PAGE>
SCHEDULE 3.8
- ------------
Subsidiaries of the Trust:
PCT Office Company
PCT Biscayne Center, Inc.
PCT Shopping Center Company
PCT Clayton, Inc.
PCT Friendship Avenue Office Company, Inc.
PCT Biscayne Boulevard Partnership
27
<PAGE>
SCHEDULE 3.10
- -------------
None
28
<PAGE>
SCHEDULE 3.11
- -------------
Issued and outstanding shares of beneficial interests of the Trust - 9,584,220.
Shares reserved for issuance upon exercise of options granted pursuant to the
Trust's 1992 Employee Stock Option Plan - 144,900.
Shares reserved for issuance upon exercise of options granted pursuant to the
Trust's 1994 Stock Option Plan for Non-Employee Trustees - 52,000. None of
these will be exercised and management will deliver confirmation of cancellation
of these options prior to the Effective Date.
29
<PAGE>
SCHEDULE 3.16
- -------------
None
30
<PAGE>
SCHEDULE 3.17
- -------------
Bonus Annual Incentive Compenstaion Program as described
in PCT's proxy dated 11/8/5 (p. 13)
Pension N/A
Profit-Sharing PCT 401(k) Plan and Trust
Deferred compensation N/A
Incentive compensation Incentive Compensation Agreement between PCT and
Robert Melzer - 8/25/95.
Stock ownership N/A
Stock purchase N/A
Stock option plan 1994 Stock Option Plan for Non-Employee Trustees
1992 Employee Stock Option Plan
Phantom stock N/A
Retirement N/A
Vacation Employee Handbook - 1/1/93
Severance Property Capital Trust Severance Plan (all
employees except Robert Melzer)
Termination Agreement - dated 10/19/92 and amended
8/25/95 (applies to Robert Melzer only)
Disability Employee Handbook - 1/1/93
Death benefit Employee Handbook - 1/1/93
Hospitalization N/A
Medical Employee Handbook - 1/1/93
Shareholders Rights Plan Plan adopted 9/28/90
31
<PAGE>
SCHEDULE 3.18
- -------------
None
32
<PAGE>
SCHEDULE 3.20
- -------------
None
33
<PAGE>
SCHEDULE 3.23
- -------------
Letter dated February 4, 1998, between Property Capital Trust and Interstate
Hotels Corporation regarding Cincinnati Marriott, Sharonville, Ohio and any
subsequent agreements relating to such properties.
Property Capital Trust may sell or otherwise dispose of all office furniture and
equipment and similar personal property and distribute the proceeds, if any, to
Property Capital Trust's shareholders.
34
<PAGE>
SCHEDULE 3.26
- -------------
None
35
<PAGE>
SCHEDULE 4.3
- ------------
There shall be no restrictions on the nature of the investments made by Property
Capital Trust except that if the merger shall not have occurred prior to either
of June 30, 1998 and September 30, 1998, then the short-term investments of the
Trust on such dates shall not be such as to cause the Trust to fail the 75%
Asset Test.
36
<PAGE>
Exhibit A
Form of Joinder
The undersigned hereby joins in the Investment Agreement (the "Agreement")
dated as of June 18, 1998 by and among Framingham York Associates Limited
Partnership, a Massachusetts limited partnership, Property Capital Trust, a
Massachusetts business trust, and Maryland Property Capital Trust, Inc., a
Maryland corporation and agrees that it/he/she shall have all of the rights and
obligations of a Purchaser under the Agreement as if it/he/she had executed the
Agreement as of the Effective Date.
At the Closing, the undersigned will purchase from the Company, and the
Company will issue and sell to the undersigned, the number of shares set forth
opposite the undersigned's name on the attached Schedule 1.1 (which shall also
------------
be attached to the Agreement) and the undersigned will deliver to the Company
the portion of the Aggregate Purchase Price set forth opposite the undersigned's
name on Schedule 1.1.
------------
In addition, the undersigned hereby makes, severally with respect to
itself/himself/herself and not jointly, the representations and warranties
contained in Article 2 of the Agreement.
Any term used herein and not defined shall have the meaning ascribed to
such term in the Agreement.
__________________________________
By:
A-1
<PAGE>
Exhibit C to Investment Agreement
---------------------------------
FORM OF
REGISTRATION RIGHTS AGREEMENT
(Shares issued at Closing)
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
---------
____________, 1998 by and among Maryland Property Capital Trust, Inc., a
Maryland corporation (the "Company"), and the Holders (as hereinafter defined).
-------
This Agreement is made pursuant to a certain Investment Agreement (the
"Investment Agreement") dated June 18, 1998 and as amended on August 7, 1998 and
- ---------------------
October __, 1998 by and among the Purchasers (as such term is defined therein),
Property Capital Trust, a Massachusetts business trust, and the Company.
Pursuant to the Investment Agreement, the Company shall issue to the Purchasers
on the date hereof (the "Closing Date") shares of the Company's common stock,
------------
$.01 par value (the "Common Stock") issued without registration under the
------------
Securities Act of 1933, as amended (the "Securities Act"). Following the Closing
--------------
Date, FYA intends to distribute the shares of Common Stock held by it to its
partners. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Investment Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS.
-------------------
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Holder" or "Holders" means any holder of outstanding Registrable Shares
------ -------
who is (i) a Purchaser; (ii) a partner of FYA; or (iii) any other Person to
which the registration rights provided for in this Agreement shall have been
properly assigned or otherwise transferred in accordance with Section 13 hereof.
"Person" means a natural person, partnership (whether general or limited),
------
trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or representative capacity.
"Prospectus" means the prospectus included in a Registration Statement,
----------
including any preliminary prospectus, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Shares covered by such Registration Statement, and by all
other amendments and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Registrable Shares" means shares of Common Stock issued or to be issued to
------------------
the Holder upon the Closing Date, excluding (A) Common Stock for which a
Registration Statement relating to the sale thereof shall have been declared
effective under the Securities Act and which have been disposed of under such
Registration Statement, (B) Common Stock sold pursuant to Rule 144 (or any
successor provision) under the Securities Act or (C) Common
C-1
<PAGE>
Stock eligible for sale pursuant to Rule 144(k) (or any successor provision)
under the Securities Act.
"Registration Expenses" means any and all expenses incident to performance
---------------------
of or compliance with this Agreement, including, without limitation: (i) all
SEC, stock exchange or National Association of Securities Dealers, Inc. ("NASD")
----
registration or filing fees; (ii) all fees and expenses incurred in connection
with compliance with state securities or "blue sky" laws (including reasonable
fees and disbursements of counsel in connection with "blue sky" qualification of
any of the Registrable Shares and the preparation of a Blue Sky Memorandum) and
compliance with the rules of NASD; (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, certificates and other documents
relating to the performance of and compliance with this Agreement; (iv) all fees
and expenses incurred in connection with the listing, if any, of the Registrable
Shares on any securities exchange or exchanges pursuant to Section 3(i) hereof,
and (v) the fees and disbursements of counsel for the Company and the
independent public accountants of the Company, including the expenses of any
special audit or "cold comfort" letters required by or incident to such
performance and compliance. Registration Expenses shall specifically exclude
underwriting discounts and commissions relating to the sale or disposition of
Registrable Shares by a selling Holder, the fees and disbursement of counsel
representing the selling Holder, and stamp, transfer, sales and similar taxes,
if any, relating to the sale or disposition of Registrable Shares by a selling
Holder, all of which shall be borne by such Holder in all cases.
"Registration Statement" means any registration statement of the Company
----------------------
which covers the issuance or resale, as applicable, of any Registrable Shares on
an appropriate form under Rule 415 promulgated under the Securities Act, or any
similar rule that may be adopted by the SEC, and all amendments and supplements
to such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.
2. REGISTRATION.
------------
(a) Filing of a Shelf Registration Statement. Subject to the conditions
----------------------------------------
set forth in this Agreement, and notwithstanding the last five (5) sentences of
Section 3(b), not later than the later to occur of (i) the 30th day following
the date on which the Company becomes eligible to file a Registration Statement
on Form S-3 or a similar "short form" registration statement or (ii) the first
anniversary of the date hereof (the "Required Filing Date"), the Company shall
--------------------
prepare and file with the Securities and Exchange Commission (the "SEC"), a
"shelf" registration statement (the "Shelf Registration Statement") providing
----------------------------
for the sale by the Holders of the Registrable Shares in accordance with the
terms hereof. Subject to the last five (5) sentences of Section 3(b), the
Company shall use all commercially reasonable efforts to cause the Shelf
Registration Statement to be declared effective by the SEC no later than the
date which is 45 days after the earlier of (i) the Required Filing Date or (ii)
the date on which the Shelf Registration Statement is actually filed with the
SEC and to keep such Shelf Registration Statement continuously effective for a
period ending on the earliest of (a) the date on which such no Holder holds any
of the Registrable Shares, (b) three (3) years after the date such Shelf
Registration Statement was declared effective or (c) the date on which all of
the Registrable Shares held by the Holders have become eligible for sale
pursuant to Rule 144 (k) (or any successor provision) promulgated under the
Securities Act (the "Shelf Expiration Date").
---------------------
(b) Demand Registration. (i) Subject to the conditions set forth in this
-------------------
Agreement, at any time after the Shelf Expiration Date, and, in each case, while
Registrable Shares are outstanding, any Holder or Holders of at least one-
quarter ( 1/4) of the Registrable Shares issued on the Closing Date may request
that
C-2
<PAGE>
the Company cause to be filed a Registration Statement providing for the sale by
such Holders of all or part of such Holders' Registrable Shares in the manner
specified in such request, including an underwritten offering in accordance with
the terms hereof (each a "Demand Registration"). Within ten (10) days after
-------------------
receipt of a request for a Demand Registration, the Company shall promptly give
written notice of such proposed registration to all other Holders. Such Holders
shall have the right, by giving written notice to the Company within fifteen
(15) days after such notice referred to in the preceding sentence has been given
by the Company to elect to have included in the Registration Statement pursuant
to a Demand Registration such of their Registrable Shares as each Holder may
request in such notice of election. Thereupon, the Company shall use all
commercially reasonable efforts to cause such Registration Statement to be
declared effective by the SEC for all Registrable Shares which the Company has
been requested to register no later than ninety (90) days following the
expiration of such fifteen (15) day period. The Company agrees to use all
commercially reasonable efforts to keep the Registration Statement pursuant to a
Demand Registration continuously effective until the earliest of (a) the date on
which the Holders no longer hold any Registrable Shares registered under such
Registration Statement, (b) the date on which the Registrable Shares are
eligible for sale by the Holders pursuant to Rule 144(k) (or any successor
provision) promulgated under the Securities Act or (c) the date which is six (6)
months from the effective date of such Registration Statement; provided,
however, that such six (6) month period shall be tolled during the period the
Holders' disposition of Registrable Shares pursuant to a Demand Registration is
suspended because of an event described in Section 3(b). The Company shall not
be obligated under this Section 2(b): (i) to effect more than one Demand
Registration in any twelve-month period, (ii) to effect more than three Demand
Registrations, in the aggregate, on behalf of the Holders.
(ii) If the method of disposition specified by the Holder or Holders
requesting a Demand Registration shall be an underwritten public offering, the
Company may designate the managing underwriter of such offering, subject to the
approval of such Holder or Holders which approval shall not be unreasonably
withheld, delayed or conditioned and shall, in connection therewith, (i) enter
into agreements customary in connection therewith (including an underwriting
agreement in customary form) and reasonably acceptable to the Company, (ii)
promptly make available to the Holder or Holders all financial and other records
as shall be reasonably necessary to enable them to exercise their due diligence
responsibilities, (iii) furnish to each Holder and each underwriter, if any, a
signed counterpart, addressed to such Holder or underwriter of (A) an opinion or
opinions of counsel to the Company and (B) a cold comfort letter or letters from
the Company's independent public accountants and (iv) incorporate in a
Prospectus supplement or post effective amendment such information as such
managing underwriter or underwriters requests. If the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Shares requested to be included in such offering exceeds the maximum number
which can be included in such offering (1) at a price reasonably related to the
then current market value of the Company's Common Stock or (2) without adversely
affecting the marketability of the offering (the "Maximum Number"), then the
--------------
Company will limit the number of Registrable Shares included in such offering to
the Maximum Number, and the Registrable Shares offered shall be selected in the
following order of priority (A) first, the Registrable Shares, if any, to be
offered for the account of the Holders (including the Holder or Holders making
the Demand Registration); provided, however, that such number of Registrable
-------- -------
Shares shall be reduced pro-rata on the basis of relative number of any
Registrable Shares requested by each such Holder to be included in such
registration to the extent necessary to reduce the total number of securities of
the Holders offered to the Maximum Amount and (B) second, the securities the
Company proposes to sell pursuant to Section 7.
(c) Notwithstanding any thing to the contrary set forth herein, no Holder
shall have any rights under this Section 2 to request the Company, and the
Company shall have no obligation, to use all commercially reasonable efforts to
cause a Registration Statement to be declared effective by the SEC at any
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time after the Common Stock issued to such Holder is (A) sold pursuant to Rule
144 (or any successor provision) under the Securities Act or (B) is eligible for
sale pursuant to Rule 144(K) or any successor provision under the Securities
Act.
(d) If after a Demand Registration Statement has been declared effective,
the offering of Registrable Shares pursuant to such Demand Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such Demand
Registration Statement will be deemed not to have become effective during the
period of such interference until the offering of Registrable Shares pursuant to
such Demand Registration Statement may legally resume.
(e) In the event that the Company shall default in its obligation to file a
Registration Statement within the time period specified in Section 2(a) other
than as a result of any act or omission of a Holder and a Holder shall be
required to undertake any steps to cause the Company to comply with this
Agreement with respect thereto following such default, the Company shall
promptly reimburse such Holder for all reasonable out-of-pocket costs
(including, without limitation, all reasonable attorneys' fees and expenses)
incurred by such Holder in connection with the enforcement of the Company's
obligation to so file (including the reasonable out-of-pocket costs of legal and
other professional advice preparatory to such enforcement).
3. REGISTRATION PROCEDURE.
----------------------
Whenever required under Section 2 to use all commercially reasonable
efforts to effect the registration of any Registrable Shares, the Company shall,
to the extent applicable:
(a) subject to the last five sentences of Section 3(b), prepare and file
with the SEC a Registration Statement with respect to such Registrable Shares
and use all commercially reasonable efforts to cause such Registration Statement
to become and remain effective for the applicable period as provided in Section
2.
(b) subject to the last five sentences of this Section 3(b), prepare and
file with the SEC from time to time such amendments and supplements to the
Registration Statement and Prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all the
Registrable Shares throughout the applicable period. Notwithstanding anything
to the contrary contained herein, the Company shall not be required to take any
of the actions described in the previous sentence, in Section 3(a), 3(d) or
Section 3(g) to the extent that (i) in the reasonable opinion of the Company (A)
securities laws applicable to such sale would require the Company to disclose
material non-public information ("Non-Public Information") and (B) the
---------- -----------
disclosure of such Non-Public Information would materially adversely affect the
Company; (ii) such sale would occur during the measurement period for
determining the amount of Common Stock in connection with the acquisition of a
business or assets by the Company (the "Measurement Period"); or (iii) the
------------------
Company is contemplating an underwritten or non-underwritten public offering of
its securities and in the reasonable opinion of the underwriters (or the
Company, in the case of a non-underwritten public offering) such sale would
interfere materially with such public offering by the Company (a "Financing
---------
Period"); and in the event of (i), (ii) or (iii) the Company simultaneously
- ------
delivers written notice to the Holders to the effect that the Holders may not
make offers or sales under the applicable Registration Statement for a period
not to exceed sixty (60) days from the date of such notice; provided, however,
-------- -------
that the Company may only deliver two such notices within any twelve-month
period and shall not deliver such notices consecutively in any twelve-month
period. In the event the sale by the Holders is suspended because of the
existence of
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Non-Public Information, the Company will notify the Holders promptly upon such
Non-Public Information being included by the Company in a filing with the SEC,
being otherwise disclosed to the public (other than through the action of any
Holder), or ceasing to be material to the Company, and upon such notice being
given by the Company, the Holders shall again, subject to the last paragraph of
this Section 3, be entitled to sell Registrable Shares as provided herein. In
the event the sale by the Holders is suspended because it is proposed to be made
during the Measurement Period or the Financing Period, as applicable, the
Company shall specify, in notifying the Holders of the suspension of the sale,
when the Measurement Period or Financing Period, as applicable, will end, at
which time the Holders shall again, subject to the last paragraph of this
Section 3, be entitled to sell Registrable Shares as provided herein. If the
Measurement Period or the Financing Period, as applicable, is thereafter changed
(but in no event to a date after the applicable sixty (60) day period), the
Company will promptly notify the Holders of such change and upon the end of the
Measurement Period or Financing Period as so changed, the Holders shall again,
subject to the last paragraph of this Section 3, be entitled to sell Registrable
Shares as provided herein. If an agreement to which such Measurement Period or
Financing Period, as applicable, relates is terminated prior to the end of the
Measurement Period or Financing Period, as applicable, the suspension period
hereunder shall end immediately and the Company shall promptly notify the
Holders of the end of the suspension period.
(c) furnish to the Holders such numbers of copies of the Registration
Statement and Prospectus included therein in conformity with the requirements of
the Securities Act and such other documents and information as they may
reasonably request.
(d) use all commercially reasonable efforts to register or qualify, and
maintain the registration and qualification of, the Registrable Shares covered
by such Registration Statement under such other securities or "blue sky" laws of
such jurisdictions within the United States and its territories as shall be
reasonably appropriate for the distribution of the Registrable Shares covered by
a Registration Statement; provided, however, that the Company shall not be
-------- -------
required in connection therewith or as a condition thereto to qualify to do
business in or to file a general consent to service of process in any
jurisdiction wherein it would not but for the requirements of this paragraph (d)
be obligated to do so; and provided further, that the Company shall not be
-------- -------
required to subject itself to taxation in any jurisdiction or to qualify such
Registrable Shares in any jurisdiction in which the securities regulatory
authority requires that any Holder submit any of its Registrable Shares to the
terms, provisions and restrictions of any escrow, lockup or similar agreement(s)
for consent to sell Registrable Shares in such jurisdiction unless such Holder
agrees to do so.
(e) promptly notify each Holder for whom Registrable Shares are covered by
the applicable Registration Statement, and confirm in writing (i) when the
Registration Statement and any post-effective amendments thereto have become
effective, (ii) when any amendment or supplement to the Prospectus contained in
such Registration Statement has been filed with the SEC, (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration
Statement or the initiation of any proceedings for that purpose, or the
suspension of any qualification under "blue sky" laws, (iv) at any time when a
Prospectus relating to such Registration Statement is required to be delivered
under the Securities Act, of the happening of an event as a result of which the
Prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
(f) use all commercially reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment.
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<PAGE>
(g) subject to the last five sentences of Section 3(b), upon the occurrence
of any event contemplated by clause (iv) of Section 3(e), use all commercially
reasonable efforts promptly to prepare and file an amendment or a supplement to
the Prospectus contained in the applicable Registration Statement or any
document incorporated in such Prospectus by reference or prepare, file and
obtain effectiveness of a post-effective amendment to such Registration
Statement, or file any other required document, in any case to the extent
necessary so that, as thereafter delivered to the purchasers of such Registrable
Shares, such Prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made.
(h) otherwise use all commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC.
(i) use all commercially reasonable efforts to list the Registrable Shares
covered by a Registration Statement with any securities exchange on which the
Common Stock of the Company is then listed.
(j) If the Company shall hereafter enter into any registration rights or
similar agreement which grants any holder of Common Stock liquidated damages or
similar penalties for failure of the Company to file a registration statement
and/or cause a registration statement to become or remain effective with respect
to such Common Stock, the Holders hereunder shall be entitle to comparable and
proportionate rights and penalties (taking into account the relative number of
shares of Common Stock) with respect to Registrable Shares then outstanding
hereunder.
In connection with and as a condition to the Company's obligations with
respect to any Registration Statements required to be filed pursuant to Section
2 and this Section 3, each Holder agrees that (i) it will not offer or sell its
Registrable Shares under any Registration Statement until it has received copies
of the Prospectus as then supplemented or amended as contemplated by Section
3(c) and receives notice from the Company that the Registration Statement and
any post-effective amendment thereto have become effective as contemplated in
Section 3(e), (ii) upon receipt of any notice from the Company contemplated by
Section 3(e)(iii), such Holder will forthwith discontinue disposition of the
Registrable Shares pursuant to the applicable Registration Statement until the
Company obtains the withdrawal of any order suspending the effectiveness of such
Registration Statement, (iii) upon receipt of any notice from the Company
contemplated by Section 3(b), such Holder will forthwith discontinue disposition
of the Registrable Shares pursuant to the applicable Registration Statement
until (a) the expiration of the Measurement Period or Financing Period, as
applicable, or the receipt of a notice from the Company that the Non-Public
Information has been included in a filing with the SEC or has otherwise been
disclosed to the public or has ceased to be material to the Company as provided
in Section 3(b) and (b) if applicable, the Holder receives copies of the
supplemented or amended Prospectus contemplated by Section 3(g) and receives
notice that any post-effective amendment has become effective, and (iv) upon
receipt of any notice from the Company contemplated by Section 3(e)(iv) (in
respect of the occurrence of an event contemplated therein), such Holder will
forthwith discontinue disposition of the Registrable Shares pursuant to the
applicable Registration Statement until such Holder receives copies of the
supplemented or amended Prospectus contemplated by Section 3(g) and receives
notice that any post-effective amendment has become effective, and in the case
of clause (iii) and (iv) of this paragraph, if so directed by the Company, such
Holder will deliver to the Company all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Shares current at the time of receipt of such notice.
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<PAGE>
4. EXPENSES.
--------
The Company shall bear all Registration Expenses incurred in connection
with the registration of the Registrable Shares pursuant to this Agreement,
except that each Holder shall be responsible for any brokerage or underwriting
commissions relating and taxes of any kind (including, without limitation,
stamp, transfer, sales and similar taxes) with respect to the sale, disposition
or transfer of Registrable Shares sold by it and for any legal, accounting and
other expenses incurred by it.
5. INDEMNIFICATION BY THE COMPANY.
------------------------------
(a) The Company agrees to indemnify each of the Holders, their respective
officers, directors, employees, agents, representatives and affiliates, each
other Person who participates as an underwriter in the offer or sale of
Registrable Shares, and each Person, if any, that controls a Holder or any such
underwriter within the meaning of the Securities Act against any and all losses,
claims, damages, actions, liabilities, costs and expenses (including without
limitation reasonable attorneys' fees, expenses and disbursements documented in
writing), joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities, (or actions or proceeding in respect thereof) costs or expenses
arise out of or are based upon any untrue or alleged untrue statement of
material fact contained in any Registration Statement on the effective date
thereof or any Prospectus contained therein, or any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; provided, however, that the indemnity agreement contained
-------- -------
in this Section 5(a) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company, provided further that the Company shall not be
-------- -------
liable to any Holder, such Holder's directors, officers, employees, agents,
representatives and affiliates or participating or controlling Person in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon (i)
an untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement thereto in reliance upon
and in conformity with written information furnished to the Company for use in
connection with the Registration Statement or the Prospectus contained therein
by such Holder, such Holder's directors, officers, employees, agents,
representatives and affiliates or participating or controlling Person or (ii)
such Holder's, such Holder's directors', officers', employees', agents',
representatives' and affiliates' or participating or controlling Person's
failure to send or give a copy of the final Prospectus furnished to it by the
Company at or prior to the time such action is required by the Securities Act to
the Person claiming an untrue statement or alleged untrue statement or omission
or alleged omission if such statement or omission was corrected in such final
prospectus. The obligations of the Company under this Section 5 shall survive
the completion of any offering of Registrable Shares pursuant to a Registration
Statement under this Agreement or otherwise and shall survive the termination of
this Agreement.
(b) Each Holder requesting or joining in any Registration Statement
severally and not jointly shall indemnify and hold harmless the Company, each of
its directors, officers, employees, agents, representatives and affiliates, each
Person, if any, who controls the Company within the meaning of the Securities
Act, and each agent and any underwriter for the Company (within the meaning of
the Securities Act) against any losses, claims, damages or liabilities, costs
and expenses (including without limitation reasonable attorneys' fees, expenses
and disbursements documented in writing), to which the Company or any such
director, officer, employee, agent, representative, affiliate, controlling
Person, agent or underwriter may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) costs, or expenses arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in such Registration Statement or any Prospectus contained therein or
arise out of or are based upon the omission or
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<PAGE>
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, (i) that such untrue statement or alleged untrue
statement or omission or alleged omission was made in such Registration
Statement, preliminary or final prospectus, summary prospectus or amendments or
supplements thereto, in reliance upon and in conformity with written information
furnished by or on behalf of such Holder for use in connection with such
Registration Statement or the Prospectus contained therein or (ii) such Holder's
failure to send or give a copy of the final prospectus furnished to it by the
Company at or prior to the time such action is required by the Securities Act to
the Person claiming an untrue statement or alleged untrue statement or omission
if such statement or omission was corrected in the final prospectus; provided,
--------
however, that the indemnity agreement contained in this Section 5(b) shall not
- -------
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of such Holder.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 5, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate in and assume the
defense thereof with counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party; provided, however, that an indemnified
-------- -------
party shall have the right to retain its own counsel, with all fees and expenses
thereof to be paid by such indemnified party, and to be apprised of all progress
in any proceeding the defense of which has been assumed by the indemnifying
party; and provided further, that in the event of a conflict of interest between
-------- -------
an indemnifying party and an indemnified party, an indemnified party shall have
the right to retain its own counsel, with all fees and expenses thereof to be
paid by the indemnifying party. The failure to notify an indemnifying party
promptly of the commencement of any such action, if and to the extent
prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
5, but the omission so to notify the indemnifying party will not relieve it of
any liability that it may have to any indemnified party otherwise than under
this Section 5. An indemnifying party shall be entitled to compromise or settle
such action, without the consent of an indemnified party if such compromise or
settlement shall dismiss the action without prejudice and shall consist solely
of monetary payments and such indemnifying party shall make such payments, or
with the consent of an indemnified party in all other cases. An indemnified
party shall not compromise or settle any action without the consent of an
indemnifying party.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation which does not
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<PAGE>
take account of the equitable considerations referred to in the immediately
preceding paragraph. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11 (f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
6. FURNISH INFORMATION: DELIVERY OF PROSPECTUS.
-------------------------------------------
(a) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that the Holders shall furnish to the
Company such information regarding themselves, the Registrable Shares held by
them, and the intended method of disposition of such securities as the Company
shall reasonably request and as shall be required in connection with the action
to be taken by the Company.
(b) Each of the Holders hereby agrees to deliver or cause delivery of the
Prospectus contained in the applicable Registration Statement to any purchaser
of the shares covered by the Registration Statement from the Holder.
7. ADDITIONAL SHARES. The Company, at its option, may register, under any
-----------------
Registration Statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
8. UNDERWRITING REQUIREMENTS. In connection with any underwritten offering,
-------------------------
the Company shall not be required under Section 2(c) to include Registrable
Shares in such underwritten offering unless the Holders of such Registrable
Shares accept the terms of the underwriting of such offering that have been
reasonably agreed upon between the Company and the underwriters selected by the
Company.
9. NO OTHER OBLIGATION TO REGISTER. Except as otherwise expressly provided in
-------------------------------
this Agreement, the Company shall have no obligation to the Holders to register
the Registrable Shares under the Securities Act.
10. RULE 144 SALES. The Company covenants that it will use all commercially
--------------
reasonable efforts to timely file the reports required to be filed by the
Company under the Securities Act and the Securities Exchange Act of 1934, as
amended, so as to enable the Holders to sell Registrable Shares pursuant to Rule
144 under the Securities Act. In connection with any sale, transfer or other
disposition by a Holder of any Registrable Shares pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing the Registrable
Shares to be sold and not bearing any Securities Act legend, and enable
certificates for such Registrable Shares to be for such number of shares and
registered in such names as such Holder may reasonably request at least ten (10)
business days prior to any sale of the Registrable Shares.
11. AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
----------------------
provisions of this sentence, may not be amended, modified, supplemented or
waived, nor may consent to departures therefrom be given, without the written
consent of the Company and the Holders of a majority of the outstanding
Registrable Shares. Notice of any such amendment, modification, supplement,
waiver or consent adopted in accordance with this Section 11 shall be provided
by the Company to each Holder of Registrable Shares at least thirty (30) days
prior to the effective date of such amendment, modification, supplement, waiver
or consent.
12. NOTICES. All notices and other communications provided for or permitted
-------
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing
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overnight delivery, (i) if to a Holder, at such Holder's registered address
appearing on the share register of the Company or (ii) if to the Company, at 177
Milk Street, Boston, Massachusetts 02109, with a copy to: Goodwin, Procter &
Hoar LLP, Exchange Place, Boston, Massachusetts 02109, Attention: David P.
Ries, P.C.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; or at
the time delivered if delivered by an air courier guaranteeing overnight
delivery.
13. TRANSFER OF REGISTRATION RIGHTS. Except as otherwise provided herein, the
-------------------------------
rights to cause the Company to register the securities granted by the Company
under Section 2 may be assigned or otherwise conveyed to a transferee, assignee
or successor of Registrable Shares, who shall be considered a "Holder" for
purposes of this Agreement; provided that (i) such transfer is effected in
accordance with applicable federal and state securities laws, and (ii) the
Company is given written notice by such Holder of said transfer, stating the
name and address of said transferee, assignee or successor and identifying the
securities with respect to which such registration rights are being assigned.
14. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and
----------------------
be binding upon the successors, assigns and transferees of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders. If any successor, assignee or transferee of any Holder
shall acquire Registrable Shares, in any manner, whether by operation of law or
otherwise, such Registrable Shares shall be held subject to all of the terms of
this Agreement, and by taking and holding such Registrable Shares such Person
shall be entitled to receive the benefits hereof and shall be conclusively
deemed to have agreed to be bound by all of the terms and provisions hereof.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement except as expressly provided in this Agreement.
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts
------------
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts applicable to
contracts made and to be performed wholly within said State.
17. SEVERABILITY. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
18. ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first written above.
COMPANY:
MARYLAND PROPERTY CAPITAL TRUST, INC.
By:_________________________________
Bruce A. Beal, President
HOLDERS:
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
By:__________________________________
Bruce A. Beal, as General Partner
By:__________________________________
Robert L. Beal, as General Partner
[OTHER SIGNATURE BLOCKS TO COME]
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Exhibit F to the Investment Agreement
-------------------------------------
FORM OF OPINION OF
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
(212) 373-3000 __________________, 1998
Framingham York Associates Limited Partnership
c/o The Beal Companies
177 Milk Street
Boston, MA 02109-3410
Ladies and Gentlemen:
We have acted as special tax counsel to Property Capital Trust, a
Massachusetts Business Trust (the "Trust"), in connection with the Investment
Agreement, dated as of June __, 1998 (the "Investment Agreement"), by and among
the Trust, Property Capital Trust, Inc., a Maryland corporation (the "Company"),
and the Purchaser (as defined therein). Capitalized terms used herein and not
otherwise defined have the respective meanings specified in the Investment
Agreement. This opinion is being furnished to you pursuant to Section 5.2(d) of
the Investment Agreement.
In rendering the opinion expressed herein, we have examined the
Investment Agreement and the Agreement and Plan of Merger, dated as of June __,
1998, by and between the Trust and the Company.
In addition, we have examined the Declaration of Trust of the Trust,
dated June 9, 1969, and each amendment thereto, and such other documents,
records and instruments as we have deemed necessary in order to enable us to
render the opinion expressed herein.
In our examination of documents, we have assumed, without independent
investigation, that (i) all documents submitted to us are authentic originals,
or if submitted as photocopies, that they faithfully reproduce the originals
thereof; (ii) all such documents have been duly authorized and executed and each
document represents the entire agreement (including amendments) among the
parties with respect to the subject matter thereto; (iii) all representations
and statements set forth in such documents are true and correct; (iv) any
representation or
<PAGE>
statement made as a belief or made "to the knowledge of," or similarly qualified
is correct and accurate without such qualification; and (v) all obligations
imposed by any such documents on the parties thereto have been or will be
performed or satisfied in accordance with their terms.
For purposes of rendering the opinion expressed herein, we have, with
your permission, assumed the accuracy of the representations contained in the
letter from the Trust addressed to us, dated __________, 1998, relating to the
organization, income, assets, distributions and ownership of the Trust and the
operation of the Trust as a real estate investment trust (a "REIT"), and relied
upon the officer's certificates and other certificates dated the date hereof
certifying that the representations in such letter from the Trust have continued
to be true and accurate until the date hereof.
Based upon the foregoing, and subject to the assumptions, exceptions
and qualifications set forth herein, we are of the opinion that, for the taxable
year of the Trust ended July 31, 1989 and at all times thereafter up to and
including the date of the disposition by the Trust of its ownership interest in
the Cincinnati Marriott, the Trust has qualified to be treated as a REIT within
the meaning of Sections 856 through 860 of the Code; including, without
limitation, the requirements of Section 856 and 857 of the Code; provided, that
--------
this opinion is made without regard to Section 856(c)(4)(B) of the Code, as such
provision was in effect prior to its removal from the Code pursuant to P.L. 105-
34.
This opinion is given as of the date hereof and is based on various
Code provisions, Treasury Regulations promulgated under the Code and
interpretations thereof by the Internal Revenue Service and the courts having
jurisdiction over such matters, all of which are subject to change either
prospectively or retroactively. Further, the Trust's qualification and taxation
as a REIT depends upon the Trust's ability to meet, through actual annual
operating results, requirements under the Code regarding its organization,
income, assets, distribution levels and diversity of stock ownership. Because
the Trust's satisfaction of these requirements for periods beginning after
December 31, 1997 will depend upon future events, no assurance can be given that
the actual results of the Trust's operations for its taxable year ending
December 31, 1998 will satisfy the tests necessary to qualify as or be taxed as
a REIT under the Code.
We express no opinion as to any federal income tax issue or other
matter except that set forth above.
This letter is furnished by us solely for your benefit in connection
with the transactions referred to in the Investment Agreement, and may not,
without our prior written consent, be circulated to, or relied upon by, any
other person except counsel for the Company.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
F-2
<PAGE>
EXHIBIT 10.2
PROPERTY CAPITAL TRUST
101 Federal Street
Boston, MA 02110
August 7, 1998
Framingham York Associates
Limited Partnership
177 Milk Street
Boston, Massachusetts 02109-3410
Ladies and Gentlemen:
Reference is hereby made to that certain Agreement and Plan of Merger (the
"Merger Agreement"), dated as of June 18, 1998, by and between Property Capital
Trust, a Massachusetts business trust (the "Trust") and Maryland Property
Capital Trust, Inc., a Maryland corporation (the "Corporation"), relating to
the merger of the Trust with and into the Corporation, and that certain
Investment Agreement (the "Investment Agreement"), dated as of June 18, 1998,
by and among Framingham York Associates Limited Partnership, a Massachusetts
limited partnership ("FYA"), the Trust and the Corporation, relating to the
proposed purchase by FYA of shares of common stock, par value $.01 per share,
of the Corporation. The parties to the Investment Agreement wish to amend the
Investment Agreement in the manner specified herein, and the parties to the
Merger Agreement wish to amend the Merger Agreement in the manner specified
herein. Capitalized terms used and not otherwise defined herein shall have the
respective meanings ascribed thereto in the Investment Agreement.
For good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties agree as follows:
1. Sections 9.1(b) and 9.1(c) of the Investment Agreement are hereby amended
by deleting the reference therein to "September 30, 1998" and by substituting
therefor "November 30, 1998."
2. Section 9.1 of the Investment Agreement is hereby amended to include new
subsection 9.1(e) which shall provide the following:
"(e) by the Trust, if the Company or the Trust shall have failed to file
a Registration Statement on Form S-4 containing the proxy statement of
the Trust and the registration statement of the Company, as required in
connection with the Transaction Documents, with the SEC on or prior to
September 30, 1998."
3. Section 11.10(b) of the Investment Agreement is hereby amended by adding
the following at the end of such Section:
"In addition to the foregoing, FYA will (i) commencing on August 1, 1998 and
terminating at the earlier to occur of (A) the Closing or (B) the termination
of the Investment Agreement, pay to the Trust the sum of $50,000 per month to
reimburse the Trust for its general office and employee expenses; and (ii)
commencing on October 1, 1998 and terminating at the earlier to occur of (A)
the Closing or (B) the termination of the Investment Agreement, reimburse the
Trust for the entire amount of the Trust's office rent. All payments referred
to in the preceding sentence shall be received by the Trust no later than the
fifth day of each month. At the Closing, the Trust will pay to FYA $100,000
less the sum of (x) $5,000, which is the approximate cost of legal and
accounting services for preparing the Form 10-Q for the Trust's third fiscal
quarter and (y) an amount equal to $9,000 per month for each month which
elapses between October 1, 1998 and the Closing, which is the approximate cost
to the shareholders of the Trust for any delay subsequent to October 1, 1998 in
the receipt
<PAGE>
of the special dividend to be declared immediately prior to the Closing. If the
Closing fails to occur, the Trust shall not be obligated to pay FYA any amounts
pursuant to the preceding sentence. Upon the Closing or the termination of the
Investment Agreement, as applicable, any monthly amounts due hereunder shall be
prorated on a daily basis for the month in which the Closing occurs. Any
amounts owed by the Trust or FYA as a result of such proration shall be paid
promptly following the Closing or termination of the Investment Agreement, as
applicable."
4. Section 7 of the Merger Agreement is hereby amended to provided the
following:
"In addition, the Merger Agreement shall be terminated if, and as such
time as, the Investment Agreement is terminated."
5. The parties hereby ratify and confirm that they continue to be bound by
the terms and provisions of each of the Investment Agreement and the Merger
Agreement, which, as expressly modified hereby, shall continue in full force
and effect.
6. This letter agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts applicable to agreements
made and to be performed entirely within such State.
7. This letter agreement may be executed in counterparts, each of which shall
be deemed an original of all which when taken together shall be deemed one and
the same instrument.
If the foregoing correctly sets forth the agreement reached between the
parties hereto with respect to the subject matter hereof, please so acknowledge
by executing a copy of this agreement in the space indicated below.
Sincerely,
PROPERTY CAPITAL TRUST
By: /s/ Robert M. Melzer
___________________________________
Name: Robert M. Melzer
Title: President
ACCEPTED AND AGREED TO:
FRAMINGHAM YORK ASSOCIATES
LIMITED PARTNERSHIP
By: /s/ Bruce A. Beal
_________________________________
Name: Bruce A. Beal
Title: General Partner
By: /s/ Robert L. Beal
_________________________________
Name: Robert L. Beal
Title: General Partner
MARYLAND PROPERTY CAPITAL TRUST,
INC.
By: /s/ Bruce A. Beal
_________________________________
Name: Bruce A. Beal
Title: President
<PAGE>
EXHIBIT 10.3
SECOND AMENDMENT
TO
INVESTMENT AGREEMENT
This SECOND AMENDMENT TO INVESTMENT AGREEMENT (hereinafter referred to as
this "Agreement") dated as of October 16, 1998 is made and entered into by and
---------
among Framingham York Associates Limited Partnership, a Massachusetts limited
partnership ("FYA" or the "Purchaser"), Property Capital Trust, a Massachusetts
---
business trust (the "Trust"), and Maryland Property Capital Trust, Inc., a
-----
Maryland corporation (the "Company").
-------
RECITALS
A. The parties hereto entered into an Investment Agreement on June 18,
1998 (the "Original Agreement").
------------------
B. The Original Agreement was amended by the parties hereto on August 7,
1998 (the "First Amendment").
---------------
C. The parties hereto desire to amend the Original Agreement and the
First Amendment as provided herein.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, do hereby agree as follows:
1. Section 1.1 is hereby amended to read in its entirety as follows:
"Issuance of Shares. Upon the terms and subject to the conditions set
------------------
forth in this Agreement, and in reliance upon the representations and
warranties hereinafter set forth, on the Closing Date (as defined in
Section 1.2), the Company will issue, sell and deliver to the Purchasers,
and the Purchasers will purchase from the Company, an aggregate of 319,489
shares (the "Shares") of common stock of the Company, par value $.01 per
------
share (the "Common Stock"), for an aggregate purchase price of one million
------------
dollars ($1,000,000) (the "Aggregate Purchase Price"). Subject to the
------------------------
provisions of Section 1.3, at the Closing (as defined in Section 1.2), each
Purchaser will purchase from the Company, and the Company will issue, sell
and deliver to such Purchaser, the number of shares set forth opposite such
Purchaser's name on Schedule 1.1 attached hereto and such Purchaser will
------------
deliver to the Company the portion of the Aggregate Purchase Price set
forth opposite such Purchaser's name on Schedule 1.1."
------------
2. Section 1.2(b) is hereby amended by deleting "and" before "(ii)" and by
adding at the end thereof the following:
"And (iii) the Trust will deliver to The Beal Companies Inc., out of cash
in the possession of the Trust before receipt of the Aggregate Purchase
Price, an amount equal to the Deposit (as defined in Section 11.10(b))
minus (x) the sum of $5,000, which is the approximate cost of legal and
accounting services for preparing the Form 10-Q for the Trust's third
fiscal quarter of 1998, (y) an amount equal to $9,000 per
<PAGE>
month, prorated on a daily basis, for each month that elapses between
October 1, 1998 and the Closing, and (z) the sum of $35,000, which is the
approximate cost of legal and accounting services for the Trust's audited
financial statements for the calendar year 1998 and preparation of the
Trust's Form 10-K for such year, in immediately available funds by wire
transfer to the account designated by The Beal Companies Inc., or by such
other means as may be agreed by the parties."
3. Section 1.3 is hereby is hereby deleted and replaced in its entirety with
the following:
"Additional Purchasers. Notwithstanding anything else herein to the
---------------------
contrary, if and to the extent required for the Company to qualify as a
real estate investment trust under the Internal Revenue Code of 1986, as
amended, at any time following the execution of the Agreement, but prior to
the date on which the Proxy Statement (as defined in Section 4.2) is filed
with the Securities and Exchange Commission (the "SEC"), FYA may assign to
---
one or more third parties a portion of its investment commitment under the
Agreement, and all rights and obligations associated therewith. Any party
to whom FYA assigns a portion of its investment commitment, and all rights
and obligations associated therewith, and any party who purchases all or a
portion of the Shares shall execute a joinder to the Agreement in the form
of Exhibit A attached hereto. All references to "Purchasers" contained in
---------
the Agreement shall be deemed to include any party who executes such a
joinder and Schedule 1.1 shall be amended to reflect the execution of such
------------
a joinder."
4. Section 2.1 is hereby amended to provide that the references to BPPH, the
FYA Merger Agreement and the PCT LP Merger Agreement are deleted, the FYA Merger
Agreement and the PCT LP Merger Agreement are no longer included in the
definition of "Transaction Documents," and the Contribution and Merger Agreement
(the "FYA/PCT LP Merger Agreement") dated as of October 15, 1998 by and between
---------------------------
FYA and Property Capital Trust Limited Partnership, a Massachusetts limited
partnership ("PCT LP"), is included in the definition of the term "Transaction
------
Documents."
5. Section 3.5 is hereby amended to add to the definition of "SEC Documents"
all periodic reports, such as Forms 10-K, 10-Q and 8-K, and proxy statements,
including amendments thereto, filed by the Trust under the Exchange Act.
6. Section 3.11(c) is hereby deleted and replaced in its entirety with the
following:
"There are no shares of beneficial interest, common stock or any other
equity security of the Trust or the Company issuable upon conversion or
exchange of any security of the Trust or the Company or any Subsidiary of
either of them. Other than pursuant to the Rights Agreement (the "Rights
------
Agreement") dated September 28, 1990 between the Trust and State Street
---------
Bank and Trust Company, no shareholder of the Trust or the Company is
entitled to any preemptive or similar rights ("Rights") to subscribe for
shares of capital stock of the Trust or the Company. The Trustees of the
Trust have exempted from the provisions of the Rights Agreement the
Transaction Documents and all transactions contemplated by the Transaction
Documents. In addition, effective immediately prior to the Closing, the
Trustees of the Trust shall terminate the Rights Agreement in accordance
with its terms and shall cause the payment of all amounts due the
shareholders of the Trust in connection with such termination and the
redemption of all outstanding Rights out of cash in the possession of the
Trust before receipt of the Aggregate Purchase Price."
2
<PAGE>
7. Section 4.2 is hereby is hereby deleted and replaced in its entirety with
the following:
"Consent Solicitation; Proxy Statement; Special Meeting.
------------------------------------------------------
(a) As promptly as practicable after the date of execution of this
Second Amendment, the General Partners of FYA shall (i) circulate a
disclosure document recommending to the limited partners of FYA that they
vote in favor of the approval of the FYA/PCT LP Merger Agreement and, if
and to the extent required under the FYA partnership agreement, the other
transactions contemplated hereby and thereby and (ii) use commercially
reasonable efforts to solicit such approval (the "FYA Partners' Consent").
(b) The Beal Companies Inc., as representatives of the Purchasers,
shall (i) while the FYA Partners' Consent is being solicited, cause
Goodwin, Procter & Hoar LLP, counsel to the Purchasers, to prepare on
behalf of the Trust and the Company a Registration Statement on Form S-4
containing the proxy statement of the Trust under the Exchange Act with
respect to the Special Meeting (as defined below) and the registration
statement of the Company (collectively the "Proxy Statement"), if required
---------------
by the Securities Act, the Exchange Act or the regulations of the American
Stock Exchange, (ii) cause the Proxy Statement to comply as to form in all
material respects with the applicable provisions of the Exchange Act and
the rules and regulations promulgated thereunder, (iii) deliver the Proxy
Statement to the Trust in form ready for filing with the SEC as soon as
practicable after receiving the FYA Partners' Consent, and (iv) use
commercially reasonable efforts to respond to SEC comments and cause the
Proxy Statement to be cleared by the SEC as soon as practicable after
receiving comments from the SEC (or notice of no SEC review).
(c) The Trust and the Company will cooperate with the representatives
of the Purchasers in the preparation of the Proxy Statement, shall file the
Proxy Statement and any correspondence with the SEC promptly upon receipt
thereof from representatives of the Purchasers, shall immediately forward
to the representatives of the Purchasers any correspondence from the SEC
and provide the representatives of the Purchasers with such information as
they may reasonably request in connection with the preparation, filing and
SEC review of the Proxy Statement.
(d) In connection with the approval of the issuance of the Shares and
the PCT Merger, the Trust, acting through its Board of Trustees, shall duly
call, give notice of, convene and hold a special meeting of shareholders
(the "Special Meeting") as soon as practicable after the Proxy Statement is
---------------
cleared by the SEC, for the purpose of voting upon the approval of such
issuance and the PCT Merger. The Trust and the Company shall include in the
Proxy Statement the recommendation of its Board of Trustees and its Board
of Directors, respectively, that shareholders vote in favor of approval of
such issuance and the PCT Merger."
8. The Registration Rights Agreement attached as Exhibit C is hereby deleted
---------
and replaced with the Registration Rights Agreement attached hereto as Exhibit
-------
C.
9. Sections 4.8 is hereby deleted in its entirety.
10. Section 4.12 is hereby amended to replace "immediately after the Closing"
with "immediately prior to the Closing."
11. Sections 4.15 is hereby deleted in its entirety.
3
<PAGE>
12. Section 4.19 is hereby deleted and replaced in its entirety with the
following:
"Post-Closing Covenants. Following the Closing, the Purchasers shall vote
----------------------
their Shares and, to the extent otherwise within their control, cause the
Company and FYA to comply with the following covenants:
(a) For a period of two (2) years after the Closing, (i) so long as the
single real estate property currently owned by FYA is the only real
estate property owned by the Company, indirectly through FYA, the
aggregate amount of borrowed money indebtedness of the Company and FYA
on a consolidated basis shall not exceed $1,000,000 and (ii) if the
Company, directly or indirectly through FYA, proposes to acquire
additional properties, the aggregate fair market value of all
properties so directly or indirectly owned by the Company on a
consolidated basis (net of all indebtedness of the Company and FYA on
a consolidated basis for money borrowed) after giving effect to such
acquisitions must equal or exceed $3,000,000.
(b) For a period of two (2) years after the Closing, the Company, directly
or indirectly through FYA, shall either (i) continue to own the real
estate property currently owned by FYA or (ii) if such property is
disposed of, own additional or substitute assets having an aggregate
fair market value (net of all indebtedness of the Company and FYA on a
consolidated basis for money borrowed and after giving effect to such
dispositions) at least equal to $3,000,000.
(c) For a period of two (2) years after the Closing, neither the Company
nor FYA shall be liquidated or dissolved.
(d) The provisions of this Section 4.19 shall survive the Closing and,
where applicable, the restrictive covenants set forth in this Section
4.19 shall also be set forth in the Partnership Agreement."
13. Section 6.1(h) is hereby amended by deleting the words "on the date hereof"
and substituting therefor "on the Closing Date."
14. Section 6.1(i) is hereby deleted and replaced in its entirety with the
following:
"(i) The partners of FYA shall have approved, pursuant to the terms of FYA
partnership agreement, the FYA/PCT LP Merger Agreement and such partners
shall have executed the necessary addendums to the FYA/PCT LP Merger
Agreement."
15. A new Section 6.2(h) is hereby added after Section 6.2(g) as follows:
"(h) The partners of FYA shall have approved, pursuant to the terms of FYA
partnership agreement, the FYA/PCT LP Merger Agreement and such partners
shall have executed the necessary addendums to the FYA/PCT LP Merger
Agreement."
16. Article 9 is hereby deleted and replaced in its entirety with the
following:
"Section 9.1 Termination. At any time prior to the Closing, this
-----------
Agreement may be terminated as follows, and the consequences of termination
shall be as follows:
(a) by mutual written consent of all of the parties to this Agreement, in
which event the parties shall agree as to the use of the Deposit (as
defined in Section 11.10(b)).
4
<PAGE>
(b) by the Purchasers or by the Trust if by November 20, 1998 either (i)
the FYA Partners' Consent has not been obtained or (ii) the Proxy
Statement has not been filed with the SEC. In the event of termination
pursuant to this Section 9.1(b) (regardless of who is the terminating
party) the Trust shall retain the Deposit;
(c) by the Trust if the Proxy Statement has not been cleared by the SEC by
the later of : (i) Monday, January 11, 1999, (ii) if the SEC did not
deliver its first round of comments until after 30 days following the
date of initial filing of the Proxy Statement, then a number of days
after January 11, 1999 equal to the number of days over 30 that
elapsed after the initial filing before the first round of SEC
comments was received, or (iii) if the SEC delivers more than a single
round of comments on the Proxy Statement, then Monday, February 1,
1999. In the event of termination pursuant to this Section 9.1(c), the
Trust shall retain the Deposit;
(d) by the Purchasers if the issuance of the Shares and the PCT Merger
Agreement have not been approved by the holders of two-thirds of the
outstanding shares of beneficial interest of the Trust by the 60/th/
day after the number of Proxy Statements (including proxy cards and
return envelopes) requested by the Trust is delivered to the Trust's
transfer agent for mailing to the Trust's shareholders; in the event
of termination pursuant to this Section 9.1(d), the Trust shall
immediately return to The Beal Companies, Inc. the Deposit minus (x)
the sum of $5,000, which is the approximate cost of legal and
accounting services for preparing the Form 10-Q for the Trust's third
fiscal quarter of 1998, (y) an amount equal to $9,000 per month,
prorated on a daily basis, for each month that elapses between October
1, 1998 and the effective date of termination of this Agreement, and
(z) the sum of $35,000, which is the approximate cost of legal and
accounting services for the Trust's audited financial statements for
the calendar year 1998 and preparation of the Trust's Form 10-K for
such year;
(e) by the Trust if (i) the conditions to Closing set forth in Sections
6.1(a), (b), (c), (e) and (j) insofar as they relate to the Trust, but
not to the Company, and in Sections 6.1(d), (g) and (h) (solely with
respect to Section 5.4 of the PCT Merger Agreement) have been
satisfied and (ii) the Purchasers have failed to consummate the
transactions contemplated by the Transaction Documents by the end of
the fourth (4/th/) business day after the issuance of the Shares and
the PCT Merger Agreement have been approved by the holders of two-
thirds of the outstanding shares of beneficial interest of the Trust;
in the event of termination pursuant to this Section 9.1(c), the Trust
shall retain the Deposit; or
(f) by the Purchasers if (i) the conditions to Closing set forth in
Sections 6.1(a), (b), (c), (e) and (j) insofar as they relate to the
Trust, but not to the Company, and in Sections 6.1(d), (g) and (h)
(solely with respect to Section 5.4 of the PCT Merger Agreement) have
not been satisfied by the end of the fourth (4/th/) business day after
the issuance of the Shares and the PCT Merger Agreement have been
approved by the holders of two-thirds of the outstanding shares of
beneficial interest of the Trust, (ii) the conditions to Closing set
forth in Sections 6.2(a), (b), (c), (d), (f), (g) and (h) have been
satisfied and the Trust has failed to consummate the transactions
contemplated by the Transaction Documents by the end of the fourth
(4/th/) business day after the issuance of the Shares and the PCT
Merger Agreement have been approved by the holders of two-thirds of
the outstanding shares of beneficial interest of the Trust or (iii)
the Trust has failed to comply in good faith with the covenants and
agreements required to be complied with by the Trust pursuant to the
Transactions Documents; in the event of termination pursuant to this
Section 9.1(f) the Trust shall immediately return to The Beal
Companies, Inc. the Deposit minus (x) the sum of $5,000, which is the
approximate cost of legal and accounting services for preparing the
Form 10-Q for
5
<PAGE>
the Trust's third fiscal quarter of 1998, (y) an amount equal to
$9,000 per month, prorated on a daily basis, for each month that
elapses between October 1, 1998 and the effective date of termination
of this Agreement, and (z) the sum of $35,000, which is the
approximate cost of legal and accounting services for the Trust's
audited financial statements for the calendar year 1998 and
preparation of the Trust's Form 10-K for such year, and promptly pay
to the Purchasers an additional amount equal to $250,000 as liquidated
damages.
Section 9.2 Manner and Effect of Termination. Any party having the right
--------------------------------
to terminate this Agreement pursuant to Section 9.1 may do so by written
notice to the other parties, and termination shall be automatically
effective upon expiration of two (2) business days after receipt of such
notice unless the event or omission giving rise to the right to terminate
has by then been cured or such notice is withdrawn by the party giving it.
Upon the effectiveness of termination pursuant to this Article 9, the
rights and obligations of all parties under this Agreement shall cease. The
parties hereto expressly acknowledge and agree that, with respect to any
termination of this Agreement in accordance with this Article 9, the
payment (or retention or repayment, as applicable) of the amounts set forth
in Section 9.1 shall constitute liquidated damages with respect to any
claim for damages or any other claim which any party would otherwise be
entitled to assert against any other party with respect to this Agreement
and the transactions contemplated hereby and shall constitute the sole and
exclusive remedy available to the party in question. Anything in this
Agreement to the contrary notwithstanding, no party shall have the right to
terminate this Agreement pursuant to Section 9.1 if such party in then in
material breach of such party's representations, warranties, covenants or
agreements contained in this Agreement."
17. Section 11.10(b) is hereby deleted and replaced in its entirety with the
following:
"The parties acknowledge that (i) payments equal to $100,000 have been made
by The Beal Companies Inc. to the Trust on account of certain expenses
incurred by the Trust, (ii) simultaneously with the execution and delivery
of this Second Amendment The Beal Companies Inc. has paid to an account
designated by the Trust an additional amount equal to $250,000 as a deposit
toward possible liquidated damages that may become due the Trust in the
event of termination of this Agreement pursuant to Section 9.1 (the total
amount of $350,000 so deposited by The Beal Companies, Inc. with the Trust
is hereafter referred to as the "Deposit"), (iii) The Beal Companies Inc.
have agreed to increase by $50,000 the $100,000 deposit heretofore made by
them with Paul, Weiss, Rifkind, Wharton & Garrison ("PWRW&G"), counsel for
the Trust, upon submission of reasonably satisfactory statements evidencing
the fact that the fees and disbursements of such firm in connection with
the transactions described in this Agreement now exceed $100,000, with the
understanding that upon the termination of this Agreement or the occurrence
of the Closing PWRW&G shall submit to The Beal Companies Inc. customary
documentation evidencing the aggregate amount of their legal fees and
disbursements in connection with the transactions described in this
Agreement and, if such amount is less than $150,000, cause any remaining
portion of such $150,000 deposit to be returned to The Beal Companies Inc.,
and (iv) no further payments are owed by FYA or The Beal Companies Inc.
pursuant to the provisions of Section 11.10(b) contained in the First
Amendment."
18. Insofar as the Agreement and Plan of Merger dated as of October 15, 1998 by
and between the Trust the Company was amended by the parties thereto on August
7, 1998 and on the date hereof, all references in the Original Agreement to "the
PCT Merger Agreement" should be modified to mean "the PCT Merger Agreement as
amended through October 15, 1998."
6
<PAGE>
19. The parties hereby ratify and confirm that they continue to be bound by the
terms and provisions of the Original Agreement and the First Amendment which,
except as expressly modified hereby, shall continue in full force and effect.
20. This Agreement may be executed in counterparts, each of which shall be
deemed an original of all which, when taken together, shall be deemed one and
the same instrument.
21. Any terms used herein and not defined shall have the meanings ascribed to
such terms in the Original Agreement.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date hereof.
FRAMINGHAM YORK ASSOCIATES LIMITED
PARTNERSHIP
By: /s/ Bruce A. Beal
----------------------------------------
Bruce A. Beal, as General Partner
By: /s/ Robert L. Beal
----------------------------------------
Robert L. Beal, as General Partner
PROPERTY CAPITAL TRUST
By: /s/ Robert M. Melzer
-----------------------------------------
Robert M. Melzer, President and Chief
Executive Officer
MARYLAND PROPERTY CAPITAL TRUST, INC.
By: /s/ Robert L. Beal
----------------------------------------
Name: Robert L. Beal
Title: Secretary
8
<PAGE>
Exhibit C to Investment Agreement
FORM OF
REGISTRATION RIGHTS AGREEMENT
(Shares issued at Closing)
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
---------
____________, 1998 by and among Maryland Property Capital Trust, Inc., a
Maryland corporation (the "Company"), and the Holders (as hereinafter defined).
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This Agreement is made pursuant to a certain Investment Agreement (the
"Investment Agreement") dated June 18, 1998 and as amended on August 7, 1998 and
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October __, 1998 by and among the Purchasers (as such term is defined therein),
Property Capital Trust, a Massachusetts business trust, and the Company.
Pursuant to the Investment Agreement, the Company shall issue to the Purchasers
on the date hereof (the "Closing Date") shares of the Company's common stock,
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$.01 par value (the "Common Stock") issued without registration under the
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Securities Act of 1933, as amended (the "Securities Act"). Following the Closing
--------------
Date, FYA intends to distribute the shares of Common Stock held by it to its
partners. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Investment Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS.
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As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Holder" or "Holders" means any holder of outstanding Registrable Shares
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who is (i) a Purchaser; (ii) a partner of FYA; or (iii) any other Person to
which the registration rights provided for in this Agreement shall have been
properly assigned or otherwise transferred in accordance with Section 13 hereof.
"Person" means a natural person, partnership (whether general or limited),
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trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or representative capacity.
"Prospectus" means the prospectus included in a Registration Statement,
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including any preliminary prospectus, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Shares covered by such Registration Statement, and by all
other amendments and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Registrable Shares" means shares of Common Stock issued or to be issued to
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the Holder upon the Closing Date, excluding (A) Common Stock for which a
Registration Statement relating to the sale thereof shall have been declared
effective under the Securities Act and which have been disposed of under such
Registration Statement, (B) Common Stock sold pursuant to Rule 144 (or any
successor provision) under the Securities Act or (C) Common
Stock eligible for sale pursuant to Rule 144(k) (or any successor provision)
under the Securities Act.
"Registration Expenses" means any and all expenses incident to performance
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of or compliance with this Agreement, including, without limitation: (i) all
SEC, stock exchange or National Association of Securities
9
<PAGE>
Dealers, Inc. ("NASD") registration or filing fees; (ii) all fees and expenses
----
incurred in connection with compliance with state securities or "blue sky" laws
(including reasonable fees and disbursements of counsel in connection with "blue
sky" qualification of any of the Registrable Shares and the preparation of a
Blue Sky Memorandum) and compliance with the rules of NASD; (iii) all expenses
of any Persons in preparing or assisting in preparing, word processing, printing
and distributing any Registration Statement, any Prospectus, certificates and
other documents relating to the performance of and compliance with this
Agreement; (iv) all fees and expenses incurred in connection with the listing,
if any, of the Registrable Shares on any securities exchange or exchanges
pursuant to Section 3(i) hereof, and (v) the fees and disbursements of counsel
for the Company and the independent public accountants of the Company, including
the expenses of any special audit or "cold comfort" letters required by or
incident to such performance and compliance. Registration Expenses shall
specifically exclude underwriting discounts and commissions relating to the sale
or disposition of Registrable Shares by a selling Holder, the fees and
disbursement of counsel representing the selling Holder, and stamp, transfer,
sales and similar taxes, if any, relating to the sale or disposition of
Registrable Shares by a selling Holder, all of which shall be borne by such
Holder in all cases.
"Registration Statement" means any registration statement of the Company
----------------------
which covers the issuance or resale, as applicable, of any Registrable Shares on
an appropriate form under Rule 415 promulgated under the Securities Act, or any
similar rule that may be adopted by the SEC, and all amendments and supplements
to such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.
2. REGISTRATION.
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(a) Filing of a Shelf Registration Statement. Subject to the conditions
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set forth in this Agreement, and notwithstanding the last five (5) sentences of
Section 3(b), not later than the later to occur of (i) the 30th day following
the date on which the Company becomes eligible to file a Registration Statement
on Form S-3 or a similar "short form" registration statement or (ii) the first
anniversary of the date hereof (the "Required Filing Date"), the Company shall
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prepare and file with the Securities and Exchange Commission (the "SEC"), a
"shelf" registration statement (the "Shelf Registration Statement") providing
----------------------------
for the sale by the Holders of the Registrable Shares in accordance with the
terms hereof. Subject to the last five (5) sentences of Section 3(b), the
Company shall use all commercially reasonable efforts to cause the Shelf
Registration Statement to be declared effective by the SEC no later than the
date which is 45 days after the earlier of (i) the Required Filing Date or (ii)
the date on which the Shelf Registration Statement is actually filed with the
SEC and to keep such Shelf Registration Statement continuously effective for a
period ending on the earliest of (a) the date on which such no Holder holds any
of the Registrable Shares, (b) three (3) years after the date such Shelf
Registration Statement was declared effective or (c) the date on which all of
the Registrable Shares held by the Holders have become eligible for sale
pursuant to Rule 144 (k) (or any successor provision) promulgated under the
Securities Act (the "Shelf Expiration Date").
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(b) Demand Registration. (i) Subject to the conditions set forth in this
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Agreement, at any time after the Shelf Expiration Date, and, in each case, while
Registrable Shares are outstanding, any Holder or Holders of at least one-
quarter ( 1/4) of the Registrable Shares issued on the Closing Date may request
that the Company cause to be filed a Registration Statement providing for the
sale by such Holders of all or part of such Holders' Registrable Shares in the
manner specified in such request, including an underwritten offering in
accordance with the terms hereof (each a "Demand Registration"). Within ten (10)
-------------------
days after receipt of a request for a Demand Registration, the Company shall
promptly give written notice of such proposed registration to all other Holders.
Such Holders shall have the right, by giving written notice to the Company
within fifteen (15) days after such notice referred to in the preceding sentence
has been given by the Company to elect to have included in the Registration
Statement pursuant to a Demand Registration such of their Registrable Shares as
each Holder may request in such notice of election. Thereupon, the Company
shall use all commercially reasonable efforts to cause such Registration
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Statement to be declared effective by the SEC for all Registrable Shares which
the Company has been requested to register no later than ninety (90) days
following the expiration of such fifteen (15) day period. The Company agrees to
use all commercially reasonable efforts to keep the Registration Statement
pursuant to a Demand Registration continuously effective until the earliest of
(a) the date on which the Holders no longer hold any Registrable Shares
registered under such Registration Statement, (b) the date on which the
Registrable Shares are eligible for sale by the Holders pursuant to Rule 144(k)
(or any successor provision) promulgated under the Securities Act or (c) the
date which is six (6) months from the effective date of such Registration
Statement; provided, however, that such six (6) month period shall be tolled
during the period the Holders' disposition of Registrable Shares pursuant to a
Demand Registration is suspended because of an event described in Section 3(b).
The Company shall not be obligated under this Section 2(b): (i) to effect more
than one Demand Registration in any twelve-month period, (ii) to effect more
than three Demand Registrations, in the aggregate, on behalf of the Holders.
(ii) If the method of disposition specified by the Holder or Holders
requesting a Demand Registration shall be an underwritten public offering, the
Company may designate the managing underwriter of such offering, subject to the
approval of such Holder or Holders which approval shall not be unreasonably
withheld, delayed or conditioned and shall, in connection therewith, (i) enter
into agreements customary in connection therewith (including an underwriting
agreement in customary form) and reasonably acceptable to the Company, (ii)
promptly make available to the Holder or Holders all financial and other records
as shall be reasonably necessary to enable them to exercise their due diligence
responsibilities, (iii) furnish to each Holder and each underwriter, if any, a
signed counterpart, addressed to such Holder or underwriter of (A) an opinion or
opinions of counsel to the Company and (B) a cold comfort letter or letters from
the Company's independent public accountants and (iv) incorporate in a
Prospectus supplement or post effective amendment such information as such
managing underwriter or underwriters requests. If the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Shares requested to be included in such offering exceeds the maximum number
which can be included in such offering (1) at a price reasonably related to the
then current market value of the Company's Common Stock or (2) without adversely
affecting the marketability of the offering (the "Maximum Number"), then the
--------------
Company will limit the number of Registrable Shares included in such offering to
the Maximum Number, and the Registrable Shares offered shall be selected in the
following order of priority (A) first, the Registrable Shares, if any, to be
offered for the account of the Holders (including the Holder or Holders making
the Demand Registration); provided, however, that such number of Registrable
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Shares shall be reduced pro-rata on the basis of relative number of any
Registrable Shares requested by each such Holder to be included in such
registration to the extent necessary to reduce the total number of securities of
the Holders offered to the Maximum Amount and (B) second, the securities the
Company proposes to sell pursuant to Section 7.
(c) Notwithstanding any thing to the contrary set forth herein, no Holder
shall have any rights under this Section 2 to request the Company, and the
Company shall have no obligation, to use all commercially reasonable efforts to
cause a Registration Statement to be declared effective by the SEC at any time
after the Common Stock issued to such Holder is (A) sold pursuant to Rule 144
(or any successor provision) under the Securities Act or (B) is eligible for
sale pursuant to Rule 144(K) or any successor provision under the Securities
Act.
(d) If after a Demand Registration Statement has been declared effective,
the offering of Registrable Shares pursuant to such Demand Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such Demand
Registration Statement will be deemed not to have become effective during the
period of such interference until the offering of Registrable Shares pursuant to
such Demand Registration Statement may legally resume.
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(e) In the event that the Company shall default in its obligation to file
a Registration Statement within the time period specified in Section 2(a) other
than as a result of any act or omission of a Holder and a Holder shall be
required to undertake any steps to cause the Company to comply with this
Agreement with respect thereto following such default, the Company shall
promptly reimburse such Holder for all reasonable out-of-pocket costs
(including, without limitation, all reasonable attorneys' fees and expenses)
incurred by such Holder in connection with the enforcement of the Company's
obligation to so file (including the reasonable out-of-pocket costs of legal and
other professional advice preparatory to such enforcement).
3. REGISTRATION PROCEDURE.
----------------------
Whenever required under Section 2 to use all commercially reasonable
efforts to effect the registration of any Registrable Shares, the Company shall,
to the extent applicable:
(a) subject to the last five sentences of Section 3(b), prepare and file
with the SEC a Registration Statement with respect to such Registrable Shares
and use all commercially reasonable efforts to cause such Registration Statement
to become and remain effective for the applicable period as provided in Section
2.
(b) subject to the last five sentences of this Section 3(b), prepare and
file with the SEC from time to time such amendments and supplements to the
Registration Statement and Prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all the
Registrable Shares throughout the applicable period. Notwithstanding anything to
the contrary contained herein, the Company shall not be required to take any of
the actions described in the previous sentence, in Section 3(a), 3(d) or Section
3(g) to the extent that (i) in the reasonable opinion of the Company (A)
securities laws applicable to such sale would require the Company to disclose
material non-public information ("Non-Public Information") and (B) the
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disclosure of such Non-Public Information would materially adversely affect the
Company; (ii) such sale would occur during the measurement period for
determining the amount of Common Stock in connection with the acquisition of a
business or assets by the Company (the "Measurement Period"); or (iii) the
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Company is contemplating an underwritten or non-underwritten public offering of
its securities and in the reasonable opinion of the underwriters (or the
Company, in the case of a non-underwritten public offering) such sale would
interfere materially with such public offering by the Company (a "Financing
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Period"); and in the event of (i), (ii) or (iii) the Company simultaneously
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delivers written notice to the Holders to the effect that the Holders may not
make offers or sales under the applicable Registration Statement for a period
not to exceed sixty (60) days from the date of such notice; provided, however,
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that the Company may only deliver two such notices within any twelve-month
period and shall not deliver such notices consecutively in any twelve-month
period. In the event the sale by the Holders is suspended because of the
existence of Non-Public Information, the Company will notify the Holders
promptly upon such Non-Public Information being included by the Company in a
filing with the SEC, being otherwise disclosed to the public (other than through
the action of any Holder), or ceasing to be material to the Company, and upon
such notice being given by the Company, the Holders shall again, subject to the
last paragraph of this Section 3, be entitled to sell Registrable Shares as
provided herein. In the event the sale by the Holders is suspended because it
is proposed to be made during the Measurement Period or the Financing Period, as
applicable, the Company shall specify, in notifying the Holders of the
suspension of the sale, when the Measurement Period or Financing Period, as
applicable, will end, at which time the Holders shall again, subject to the last
paragraph of this Section 3, be entitled to sell Registrable Shares as provided
herein. If the Measurement Period or the Financing Period, as applicable, is
thereafter changed (but in no event to a date after the applicable sixty (60)
day period), the Company will promptly notify the Holders of such change and
upon the end of the Measurement Period or Financing Period as so changed, the
Holders shall again, subject to the last paragraph of this Section 3, be
entitled to sell Registrable Shares as provided herein. If an agreement to
which such Measurement Period or Financing Period, as applicable, relates is
terminated prior to the end of the Measurement Period or Financing Period, as
applicable, the suspension
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period hereunder shall end immediately and the Company shall promptly notify the
Holders of the end of the suspension period.
(c) furnish to the Holders such numbers of copies of the Registration
Statement and Prospectus included therein in conformity with the requirements of
the Securities Act and such other documents and information as they may
reasonably request.
(d) use all commercially reasonable efforts to register or qualify, and
maintain the registration and qualification of, the Registrable Shares covered
by such Registration Statement under such other securities or "blue sky" laws of
such jurisdictions within the United States and its territories as shall be
reasonably appropriate for the distribution of the Registrable Shares covered by
a Registration Statement; provided, however, that the Company shall not be
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required in connection therewith or as a condition thereto to qualify to do
business in or to file a general consent to service of process in any
jurisdiction wherein it would not but for the requirements of this paragraph (d)
be obligated to do so; and provided further, that the Company shall not be
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required to subject itself to taxation in any jurisdiction or to qualify such
Registrable Shares in any jurisdiction in which the securities regulatory
authority requires that any Holder submit any of its Registrable Shares to the
terms, provisions and restrictions of any escrow, lockup or similar agreement(s)
for consent to sell Registrable Shares in such jurisdiction unless such Holder
agrees to do so.
(e) promptly notify each Holder for whom Registrable Shares are covered by
the applicable Registration Statement, and confirm in writing (i) when the
Registration Statement and any post-effective amendments thereto have become
effective, (ii) when any amendment or supplement to the Prospectus contained in
such Registration Statement has been filed with the SEC, (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration
Statement or the initiation of any proceedings for that purpose, or the
suspension of any qualification under "blue sky" laws, (iv) at any time when a
Prospectus relating to such Registration Statement is required to be delivered
under the Securities Act, of the happening of an event as a result of which the
Prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
(f) use all commercially reasonable efforts to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at the
earliest possible moment.
(g) subject to the last five sentences of Section 3(b), upon the
occurrence of any event contemplated by clause (iv) of Section 3(e), use all
commercially reasonable efforts promptly to prepare and file an amendment or a
supplement to the Prospectus contained in the applicable Registration Statement
or any document incorporated in such Prospectus by reference or prepare, file
and obtain effectiveness of a post-effective amendment to such Registration
Statement, or file any other required document, in any case to the extent
necessary so that, as thereafter delivered to the purchasers of such Registrable
Shares, such Prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made.
(h) otherwise use all commercially reasonable efforts to comply with all
applicable rules and regulations of the SEC.
(i) use all commercially reasonable efforts to list the Registrable Shares
covered by a Registration Statement with any securities exchange on which the
Common Stock of the Company is then listed.
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(j) If the Company shall hereafter enter into any registration rights or
similar agreement which grants any holder of Common Stock liquidated damages or
similar penalties for failure of the Company to file a registration statement
and/or cause a registration statement to become or remain effective with respect
to such Common Stock, the Holders hereunder shall be entitle to comparable and
proportionate rights and penalties (taking into account the relative number of
shares of Common Stock) with respect to Registrable Shares then outstanding
hereunder.
In connection with and as a condition to the Company's obligations with
respect to any Registration Statements required to be filed pursuant to Section
2 and this Section 3, each Holder agrees that (i) it will not offer or sell its
Registrable Shares under any Registration Statement until it has received copies
of the Prospectus as then supplemented or amended as contemplated by Section
3(c) and receives notice from the Company that the Registration Statement and
any post-effective amendment thereto have become effective as contemplated in
Section 3(e), (ii) upon receipt of any notice from the Company contemplated by
Section 3(e)(iii), such Holder will forthwith discontinue disposition of the
Registrable Shares pursuant to the applicable Registration Statement until the
Company obtains the withdrawal of any order suspending the effectiveness of such
Registration Statement, (iii) upon receipt of any notice from the Company
contemplated by Section 3(b), such Holder will forthwith discontinue disposition
of the Registrable Shares pursuant to the applicable Registration Statement
until (a) the expiration of the Measurement Period or Financing Period, as
applicable, or the receipt of a notice from the Company that the Non-Public
Information has been included in a filing with the SEC or has otherwise been
disclosed to the public or has ceased to be material to the Company as provided
in Section 3(b) and (b) if applicable, the Holder receives copies of the
supplemented or amended Prospectus contemplated by Section 3(g) and receives
notice that any post-effective amendment has become effective, and (iv) upon
receipt of any notice from the Company contemplated by Section 3(e)(iv) (in
respect of the occurrence of an event contemplated therein), such Holder will
forthwith discontinue disposition of the Registrable Shares pursuant to the
applicable Registration Statement until such Holder receives copies of the
supplemented or amended Prospectus contemplated by Section 3(g) and receives
notice that any post-effective amendment has become effective, and in the case
of clause (iii) and (iv) of this paragraph, if so directed by the Company, such
Holder will deliver to the Company all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Shares current at the time of receipt of such notice.
4. EXPENSES.
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The Company shall bear all Registration Expenses incurred in connection
with the registration of the Registrable Shares pursuant to this Agreement,
except that each Holder shall be responsible for any brokerage or underwriting
commissions relating and taxes of any kind (including, without limitation,
stamp, transfer, sales and similar taxes) with respect to the sale, disposition
or transfer of Registrable Shares sold by it and for any legal, accounting and
other expenses incurred by it.
5. INDEMNIFICATION BY THE COMPANY.
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(a) The Company agrees to indemnify each of the Holders, their respective
officers, directors, employees, agents, representatives and affiliates, each
other Person who participates as an underwriter in the offer or sale of
Registrable Shares, and each Person, if any, that controls a Holder or any such
underwriter within the meaning of the Securities Act against any and all losses,
claims, damages, actions, liabilities, costs and expenses (including without
limitation reasonable attorneys' fees, expenses and disbursements documented in
writing), joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
liabilities, (or actions or proceeding in respect thereof) costs or expenses
arise out of or are based upon any untrue or alleged untrue statement of
material fact contained in any Registration Statement on the effective date
thereof or any Prospectus contained therein, or any omission or alleged omission
to state therein a material
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fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading;
provided, however, that the indemnity agreement contained in this Section 5(a)
- -------- -------
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, provided further that the Company shall not be liable to any Holder,
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such Holder's directors, officers, employees, agents, representatives and
affiliates or participating or controlling Person in any such case to the extent
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon (i) an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Registration Statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Company for use in
connection with the Registration Statement or the Prospectus contained therein
by such Holder, such Holder's directors, officers, employees, agents,
representatives and affiliates or participating or controlling Person or (ii)
such Holder's, such Holder's directors', officers', employees', agents',
representatives' and affiliates' or participating or controlling Person's
failure to send or give a copy of the final Prospectus furnished to it by the
Company at or prior to the time such action is required by the Securities Act to
the Person claiming an untrue statement or alleged untrue statement or omission
or alleged omission if such statement or omission was corrected in such final
prospectus. The obligations of the Company under this Section 5 shall survive
the completion of any offering of Registrable Shares pursuant to a Registration
Statement under this Agreement or otherwise and shall survive the termination of
this Agreement.
(b) Each Holder requesting or joining in any Registration Statement
severally and not jointly shall indemnify and hold harmless the Company, each of
its directors, officers, employees, agents, representatives and affiliates, each
Person, if any, who controls the Company within the meaning of the Securities
Act, and each agent and any underwriter for the Company (within the meaning of
the Securities Act) against any losses, claims, damages or liabilities, costs
and expenses (including without limitation reasonable attorneys' fees, expenses
and disbursements documented in writing), to which the Company or any such
director, officer, employee, agent, representative, affiliate, controlling
Person, agent or underwriter may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) costs, or expenses arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in such Registration Statement or any Prospectus contained therein or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, (i) that such untrue statement or alleged untrue statement or omission
or alleged omission was made in such Registration Statement, preliminary or
final prospectus, summary prospectus or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished by or on
behalf of such Holder for use in connection with such Registration Statement or
the Prospectus contained therein or (ii) such Holder's failure to send or give a
copy of the final prospectus furnished to it by the Company at or prior to the
time such action is required by the Securities Act to the Person claiming an
untrue statement or alleged untrue statement or omission if such statement or
omission was corrected in the final prospectus; provided, however, that the
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indemnity agreement contained in this Section 5(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Holder.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 5, notify the indemnifying party in writing of the commencement thereof
and the indemnifying party shall have the right to participate in and assume the
defense thereof with counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party; provided, however, that an indemnified
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party shall have the right to retain its own counsel, with all fees and expenses
thereof to be paid by such indemnified party, and to be apprised of all progress
in any proceeding the defense of which has been assumed by the indemnifying
party; and provided further, that in the event of a conflict of interest between
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an
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indemnifying party and an indemnified party, an indemnified party shall have the
right to retain its own counsel, with all fees and expenses thereof to be paid
by the indemnifying party. The failure to notify an indemnifying party promptly
of the commencement of any such action, if and to the extent prejudicial to its
ability to defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 5, but the omission so to
notify the indemnifying party will not relieve it of any liability that it may
have to any indemnified party otherwise than under this Section 5. An
indemnifying party shall be entitled to compromise or settle such action,
without the consent of an indemnified party if such compromise or settlement
shall dismiss the action without prejudice and shall consist solely of monetary
payments and such indemnifying party shall make such payments, or with the
consent of an indemnified party in all other cases. An indemnified party shall
not compromise or settle any action without the consent of an indemnifying
party.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11 (f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
6. FURNISH INFORMATION: DELIVERY OF PROSPECTUS.
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(a) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that the Holders shall furnish to the
Company such information regarding themselves, the Registrable Shares held by
them, and the intended method of disposition of such securities as the Company
shall reasonably request and as shall be required in connection with the action
to be taken by the Company.
(b) Each of the Holders hereby agrees to deliver or cause delivery of the
Prospectus contained in the applicable Registration Statement to any purchaser
of the shares covered by the Registration Statement from the Holder.
7. ADDITIONAL SHARES. The Company, at its option, may register, under any
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Registration Statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
8. UNDERWRITING REQUIREMENTS. In connection with any underwritten offering,
-------------------------
the Company shall not be required under Section 2(c) to include Registrable
Shares in such underwritten offering unless the Holders of such Registrable
Shares accept the terms of the underwriting of such offering that have been
reasonably agreed upon between the Company and the underwriters selected by the
Company.
C-8
<PAGE>
9. NO OTHER OBLIGATION TO REGISTER. Except as otherwise expressly provided in
-------------------------------
this Agreement, the Company shall have no obligation to the Holders to register
the Registrable Shares under the Securities Act.
10. RULE 144 SALES. The Company covenants that it will use all commercially
--------------
reasonable efforts to timely file the reports required to be filed by the
Company under the Securities Act and the Securities Exchange Act of 1934, as
amended, so as to enable the Holders to sell Registrable Shares pursuant to Rule
144 under the Securities Act. In connection with any sale, transfer or other
disposition by a Holder of any Registrable Shares pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing the Registrable
Shares to be sold and not bearing any Securities Act legend, and enable
certificates for such Registrable Shares to be for such number of shares and
registered in such names as such Holder may reasonably request at least ten (10)
business days prior to any sale of the Registrable Shares.
11. AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
----------------------
provisions of this sentence, may not be amended, modified, supplemented or
waived, nor may consent to departures therefrom be given, without the written
consent of the Company and the Holders of a majority of the outstanding
Registrable Shares. Notice of any such amendment, modification, supplement,
waiver or consent adopted in accordance with this Section 11 shall be provided
by the Company to each Holder of Registrable Shares at least thirty (30) days
prior to the effective date of such amendment, modification, supplement, waiver
or consent.
12. NOTICES. All notices and other communications provided for or permitted
-------
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery, (i) if
to a Holder, at such Holder's registered address appearing on the share register
of the Company or (ii) if to the Company, at 177 Milk Street, Boston,
Massachusetts 02109, with a copy to: Goodwin, Procter & Hoar LLP, Exchange
Place, Boston, Massachusetts 02109, Attention: David P. Ries, P.C.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; or at
the time delivered if delivered by an air courier guaranteeing overnight
delivery.
13. TRANSFER OF REGISTRATION RIGHTS. Except as otherwise provided herein, the
-------------------------------
rights to cause the Company to register the securities granted by the Company
under Section 2 may be assigned or otherwise conveyed to a transferee, assignee
or successor of Registrable Shares, who shall be considered a "Holder" for
purposes of this Agreement; provided that (i) such transfer is effected in
accordance with applicable federal and state securities laws, and (ii) the
Company is given written notice by such Holder of said transfer, stating the
name and address of said transferee, assignee or successor and identifying the
securities with respect to which such registration rights are being assigned.
14. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and
----------------------
be binding upon the successors, assigns and transferees of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders. If any successor, assignee or transferee of any Holder
shall acquire Registrable Shares, in any manner, whether by operation of law or
otherwise, such Registrable Shares shall be held subject to all of the terms of
this Agreement, and by taking and holding such Registrable Shares such Person
shall be entitled to receive the benefits hereof and shall be conclusively
deemed to have agreed to be bound by all of the terms and provisions hereof.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement except as expressly provided in this Agreement.
C-9
<PAGE>
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts
------------
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts applicable to
contracts made and to be performed wholly within said State.
17. SEVERABILITY. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
18. ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
C-10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
COMPANY:
MARYLAND PROPERTY CAPITAL TRUST, INC.
By:_________________________________
Bruce A. Beal, President
HOLDERS:
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
By:__________________________________
Bruce A. Beal, as General Partner
By:__________________________________
Robert L. Beal, as General Partner
[OTHER SIGNATURE BLOCKS TO COME]
C-11
<PAGE>
EXHIBIT 10.4
CONTRIBUTION AND MERGER AGREEMENT
by and between
Property Capital Trust Limited Partnership
and
Framingham York Associates Limited Partnership
and
Maryland Property Capital Trust, Inc.
(solely for the purposes of Section 6.04 and Section 6.05)
Dated as of October 16, 1998
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. THE MERGER........................................................... 1
Section 1.01. The Merger................................................... 1
Section 1.02. Exchange of Interests........................................ 1
ARTICLE 2. PARTNERSHIP AGREEMENT................................................ 2
ARTICLE 3. TRANSFER AND CONVEYANCE OF ASSETS AND ASSUMPTION OF LIABILITIES...... 2
Section 3.01. Transfer, Conveyance and Assumption.......................... 2
Section 3.02. Further Assurances........................................... 2
Section 3.03. Closing...................................................... 2
Section 3.04. Documents to be Delivered at Closing......................... 2
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF FYA................................ 3
Section 4.01. Existence and Power.......................................... 3
Section 4.02. Authorization................................................ 3
Section 4.03. Governmental Authorization................................... 3
Section 4.04. Consents and Approvals....................................... 4
Section 4.05. No Violation................................................. 4
Section 4.06. No Brokers................................................... 4
Section 4.07. Litigation................................................... 4
Section 4.08. No Other Agreements to Sell.................................. 4
Section 4.09. Non-Foreign Status........................................... 4
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PCT LP............................. 4
Section 5.01. Existence and Power.......................................... 5
Section 5.02. Authorization................................................ 5
Section 5.03. Governmental Authorization................................... 5
Section 5.04. Consents and Approvals....................................... 5
Section 5.05. No Violation................................................. 5
Section 5.06. No Brokers................................................... 5
Section 5.07. Litigation................................................... 5
ARTICLE 6. COVENANTS............................................................ 5
Section 6.01. Conduct of the Business of FYA............................... 5
Section 6.02. Conduct of the Business of PCT LP............................ 6
Section 6.03 No Solicitation.............................................. 7
Section 6.04 Confidentiality.............................................. 7
Section 6.05 Registration of Shares....................................... 7
ARTICLE 7. CONDITIONS TO CLOSING................................................ 7
Section 7.01. Reincorporation Merger....................................... 7
Section 7.02. Consummation of the Investment Agreement..................... 7
Section 7.03 Approval by Partners......................................... 7
Section 7.04. No Violations................................................ 7
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 7.05. Consents..................................................... 7
Section 7.07. Representations and Warranties............................... 8
Section 7.08. No Material Adverse Change................................... 8
ARTICLE 8. TERMINATION.......................................................... 8
Section 8.01. Termination.................................................. 8
Section 8.02. Effect of Termination........................................ 8
ARTICLE 9. MISCELLANEOUS........................................................ 8
Section 9.01. General Partner Authorization................................ 8
Section 9.02. Survival of Representations and Warranties................... 8
Section 9.03. Amendments; No Waivers....................................... 8
Section 9.04. Integration.................................................. 9
Section 9.05. Successors and Assigns....................................... 9
Section 9.06. Governing Law................................................ 9
Section 9.07. Counterparts................................................. 9
Section 9.08. Third Party Beneficiary...................................... 9
Section 9.09. Notices...................................................... 9
Addendum.................................................................... A-1
</TABLE>
List of Exhibits
- ----------------
* Exhibit A Amended and Restated Agreement of Limited Partnership of the
Surviving Partnership
Exhibit B Registration Rights Agreement
____________
* Filed as Exhibit 4.1 to the Registration Statement on form S-4 for Maryland
Property Capital Trust, Inc. filed with the Securities and Exchange
Commission on November 20, 1998.
(ii)
<PAGE>
CONTRIBUTION AND MERGER AGREEMENT
This CONTRIBUTION AND MERGER AGREEMENT (including all exhibits, hereinafter
referred to as this "Agreement") dated as of October 16, 1998 is made and
---------
entered into by and among Property Capital Trust Limited Partnership, a
Massachusetts limited partnership ("PCT LP"), Framingham York Associates Limited
------
Partnership, a Massachusetts limited partnership ("FYA") and, solely for the
---
purposes of Section 6.04 and Section 6.05, Maryland Property Capital Trust,
Inc., a Maryland corporation and the sole general partner of PCT LP ("PCT
---
Inc.").
RECITALS
A. PCT LP is a limited partnership of which PCT Inc. is the sole general
partner and Michael A. Manzo, an individual, is the sole limited partner.
B. PCT LP desires to acquire the properties and other assets, and to
assume all of the liabilities and obligations, of FYA by means of a merger of
PCT LP with and into FYA.
C. The Massachusetts Uniform Limited Partnership Act (the "Massachusetts
-------------
ULPA") authorizes the merger of one or more Massachusetts limited partnerships
- ----
with and into a Massachusetts limited partnership.
D. FYA and PCT LP now desire to provide the terms and conditions whereby
they would merge (the "Merger"), following which Merger FYA shall be the
------
surviving limited partnership.
NOW, THEREFORE, in consideration of the mutual promises hereinafter set
forth and of other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound hereby, do hereby agree as follows:
ARTICLE 1. THE MERGER
Section 1.01. The Merger.
----------
(a) On such date as the general partners of FYA (the "FYA General
-----------
Partners") and PCT, Inc., as the general partner of PCT LP (the "PCT LP General
- -------- --------------
Partner"), shall determine, after satisfaction or, to the extent permitted
- -------
hereunder, waiver of all conditions to the Merger, PCT LP shall merge with and
into FYA, which shall be the surviving limited partnership, and FYA shall file a
certificate of merger (the "Certificate of Merger") with the Secretary of State
---------------------
of the Commonwealth of Massachusetts and make all other filings or recordings
required by Massachusetts law in connection with the Merger. The Merger shall
become effective at such time as is specified in the Certificate of Merger (the
"Effective Time").
--------------
(b) At the Effective Time, PCT LP shall be merged with and into FYA,
whereupon the separate existence of PCT LP shall cease, and FYA shall be the
surviving limited partnership of the Merger (the "Surviving Partnership") in
---------------------
accordance with Section 16A of the Massachusetts ULPA.
Section 1.02. Exchange of Interests.
---------------------
(a) At the Effective Time, each limited partner of PCT LP shall
receive, in exchange for such partner's interest in PCT LP, units of partnership
interest ("Units") in the Surviving Partnership as set forth in the Second
-----
Amended and Restated Limited Partnership Agreement of the Surviving Partnership
(the "Partnership
-----------
<PAGE>
Agreement"), which is attached hereto as Exhibit A. Units shall be exchangeable,
- --------- ---------
pursuant to the terms of the Partnership Agreement, for shares (the "Shares") of
------
common stock, par value $.01 per share (the "Common Stock") of Property Capital
------------
Trust, Inc., a Maryland corporation and the surviving entity following the
merger of Property Capital Trust, a Massachusetts business with and into
Maryland Property Capital Trust, Inc., a Maryland Corporation ("New PCT").
-------
(b) At the Effective Time, the sole general partner of PCT LP shall
receive, in exchange for such partner's interest in PCT LP, Units as set forth
in the Partnership Agreement.
(c) At the Effective Time, each partner (as of immediately prior to
the Effective Time) in FYA shall receive Units as set forth in the Partnership
Agreement.
ARTICLE 2. PARTNERSHIP AGREEMENT
The partnership agreement of FYA in effect at the Effective Time shall be
amended and restated in substantially the form attached hereto as Exhibit A
---------
which agreement shall be the partnership agreement of the Surviving Partnership
unless and until amended in accordance with its terms and applicable law. The
name of the Surviving Partnership shall be "Property Capital Trust Limited
Partnership."
ARTICLE 3. TRANSFER AND CONVEYANCE OF ASSETS AND ASSUMPTION OF LIABILITIES
Section 3.01. Transfer, Conveyance and Assumption. At the Effective
-----------------------------------
Time, FYA shall continue in existence as the Surviving Partnership, and, without
further transfer, succeed to and possess all of the rights, privileges and
powers of PCT LP, and all of the assets and property of whatever kind and
character of PCT LP shall vest in FYA without further act or deed; thereafter,
FYA, as the Surviving Partnership, shall be liable for all of the liabilities
and obligations of PCT LP, and any claim or judgment against PCT LP may be
enforced against FYA, as the Surviving Partnership, in accordance with the
Massachusetts ULPA.
Section 3.02. Further Assurances. If at any time FYA shall consider or
------------------
be advised that any further assignment, conveyance or assurance is necessary or
advisable to vest, perfect or confirm of record in the Surviving Partnership the
title to any property or right of PCT LP, or otherwise to carry out the
provisions hereof, the proper representatives of PCT LP, including the general
partner of the PCT LP as of the Effective Time, shall execute and deliver any
and all proper deeds, assignments, and assurances and do all things necessary or
proper to vest, perfect or convey title to such property or right in the
Surviving Partnership, and otherwise to carry out the provisions hereof.
Section 3.03. Closing. The closing (the "Closing") of the Merger
------- -------
contemplated by this Agreement shall occur immediately following the closing of
the transactions contemplated by the Investment Agreement dated as June 18, 1998
and amended as of August 7, 1998 and as of the date hereof by and among FYA, PCT
LP and PCT Inc. At or before such Closing, which shall be held at a place and
time determined by FYA in its sole discretion, the PCT LP General Partner and/or
the PCT Limited Partners (or their attorney(s)-in-fact) will execute all closing
documents required by the FYA General Partners in accordance with Section 3.04
and deliver the same to a person designated by the PCT LP General Partner (such
person, the "Closing Agent").
-------------
Section 3.04. Documents to be Delivered at Closing.
------------------------------------
(a) At the Closing, the PCT LP General Partner on behalf of PCT LP
shall execute, acknowledge where deemed desirable or necessary by the FYA
General Partners, and deliver to the Closing Agent, in addition to any other
documents mentioned elsewhere herein, the following:
2
<PAGE>
(i) If requested by the FYA General Partners, a certified copy of
all appropriate corporate resolutions or partnership actions authorizing the
execution, delivery and performance by PCT LP of this Agreement, all ancillary
agreements, instruments or certificates, if any, and the documents required for
the Closing.
(ii) An affidavit establishing an exemption from the withholding
requirements of the Foreign Investment in Real Property Tax Act ("FIRPTA"), as
------
amended. In the event the PCT fails to provide such an affidavit, FYA shall be
entitled to withhold from the consideration otherwise payable and pay to the
Internal Revenue Service the sums required to be withheld pursuant to FIRPTA
(and the amount so withheld shall be paid by FYA to the Internal Revenue
Service, in order for FYA to comply with the provisions of Section 1445 of the
Internal Revenue Code of 1986, as amended (the "Code"), or successor similar
----
legislation, as the same may be amended hereafter).
(iii) Any other documents reasonably necessary to effectuate the
transactions contemplated hereby, including the Merger. Such documents shall
include, without limitation, filings with any applicable governmental
jurisdiction in which FYA is required to file its partnership or limited
liability company documentation.
(b) At the Closing, FYA shall deliver to PCT LP, a certificate either (x)
reaffirming the accuracy of all representations and warranties and the
satisfaction of all covenants made by FYA herein, or (y) if such reaffirmation
cannot be made, identifying those representations and warranties with respect to
which circumstances have changed.
(c) At the Closing, each of the limited partners of FYA shall, directly or
through an Attorney-in-Fact, execute, acknowledge where deemed desirable or
necessary by PCT LP, and deliver to the Closing Agent, in addition to any other
documents mentioned elsewhere herein, an Addendum to Contribution and Merger
Agreement in the form attached hereto.
(d) At the Closing, PCT Inc. shall deliver the Registration Rights
Agreement, as defined in Section 6.05.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF FYA
As a material inducement to PCT LP to enter into this Agreement and to
consummate the transactions contemplated hereby, FYA hereby makes to PCT LP each
of the representations and warranties set forth in this Article 4, which
representations and warranties shall be true as of the date hereof and as of the
Closing.
Section 4.01. Existence and Power. FYA is a limited partnership duly
-------------------
formed, validly existing and in good standing under the laws of the Commonwealth
of Massachusetts.
Section 4.02. Authorization. The execution, delivery and performance by
-------------
FYA of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary partnership
action, if any, including any consent or other action that is required of the
limited partners of FYA (the "FYA Limited Partners") by the limited partnership
--------------------
agreement of FYA. Subject to (i) limitations under applicable law on rights to
indemnification, (ii) the effects of any applicable bankruptcy, reorganization,
moratorium or similar laws, and (iii) general principles of equity, this
Agreement constitutes a valid, binding and enforceable agreement of FYA.
3
<PAGE>
Section 4.03. Governmental Authorization. To the actual knowledge of
--------------------------
Bruce A. Beal and Robert L. Beal as individual General Partners of FYA
("Seller's Knowledge"), the execution, delivery and performance by FYA of this
- --------------------
Agreement and the consummation by it of the transactions contemplated hereby,
require no action by or in respect of, or filing with, any governmental body,
agency, official or authority other than those obtained or made (or to be made)
prior to the Closing.
Section 4.04. Consents and Approvals. To Seller's Knowledge, no consent,
----------------------
waiver, approval or authorization of any third party is required to be obtained
by FYA in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby except any of the foregoing
that shall have been satisfied prior to the Closing.
Section 4.05. No Violation. To Seller's Knowledge, the execution,
------------
delivery and performance by FYA of this Agreement and the consummation by it of
the transactions contemplated hereby do not and will not (i) violate the limited
partnership agreements of FYA, (ii) violate any provision of any law, rule or
regulation applicable to FYA, (iii) constitute a breach of, or result in a
default under, any existing material obligation of FYA under any provision of
any material agreement, contract or other instrument to which FYA is a party or
by which it or its property, if applicable, is bound, or (iv) constitute a
violation of any court or administrative order, writ, judgment or decree that
names FYA and is specifically directed to it or its property, if applicable.
Section 4.06. No Brokers. FYA has not entered into, nor will it enter
----------
into, any agreement, arrangement or understanding with any person or firm which
will result in the obligation of the Surviving Partnership to pay any finder's
fee, brokerage commission or similar payment in connection with the transactions
contemplated hereby.
Section 4.07. Litigation. To Seller's Knowledge, there are no actions,
----------
suits, arbitration, claims, attachments, proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other
proceedings, actual or proposed, pending or threatened in writing by or against
FYA or either of the FYA General Partners which would materially and adversely
affect FYA, the ownership or operation of its properties, or its ability to
consummate the transactions contemplated hereby. To Seller's Knowledge, there
is no outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting FYA, which
in any such case would impair its ability to enter into and perform all of its
obligations under this Agreement and the transactions contemplated hereby.
Section 4.08. No Other Agreements to Sell. FYA has not made any
---------------------------
agreement with, nor will it enter into any agreement with, and it does not have
any obligation (absolute or contingent) to, any other person or firm to sell,
transfer or in any way encumber any of its properties or assets or to enter into
any agreement with respect to a sale, transfer or encumbrance of, or put or call
right with respect to, any of its properties or assets.
Section 4.09. Non-Foreign Status. FYA is not a foreign person, foreign
------------------
corporation, foreign partnership, foreign limited liability company, foreign
trust or foreign estate (as defined in the Code) and, therefore, is not subject
to the provisions of the Code relating to the withholding of sales proceeds to
foreign persons.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF PCT LP
As a material inducement to FYA to enter into this Agreement and to
consummate the transactions contemplated hereby, PCT LP hereby makes to FYA each
of the representations and warranties set forth in this Article 5, which
representations and warranties shall be true as of the date hereof and as of the
Closing.
4
<PAGE>
Section 5.01. Existence and Power. PCT LP is a limited partnership duly
-------------------
formed, validly existing and in good standing under the laws of the Commonwealth
of Massachusetts.
Section 5.02. Authorization. The execution, delivery and performance by
-------------
PCT LP of this Agreement and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary partnership
action, if any, including any consent or other action that is required of the
PCT LP Limited Partners. Subject to (i) limitations under applicable law on
rights to indemnification, (ii) the effects of any applicable bankruptcy,
reorganization, moratorium or similar laws, and (iii) general principles of
equity, this Agreement constitutes a valid, binding and enforceable agreement of
PCT LP.
Section 5.03. Governmental Authorization. To the actual knowledge of
--------------------------
Bruce A. Beal, Robert L. Beal and Michael A. Manzo as officers and
representatives of the PCT LP General Partner ("Acquiror's Knowledge"), the
--------------------
execution, delivery and performance by PCT LP of this Agreement and the
consummation by it of the transactions contemplated hereby, require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority other than those obtained or made (or to be made) prior to the
Closing.
Section 5.04. Consents and Approvals. To Acquiror's Knowledge, no
----------------------
consent, waiver, approval or authorization of any third party is required to be
obtained by PCT LP in connection with the execution, delivery and performance of
this Agreement and the transactions contemplated hereby except any of the
foregoing that shall have been satisfied prior to the Closing.
Section 5.05. No Violation. To Acquiror's Knowledge, the execution,
------------
delivery and performance by PCT LP of this Agreement and the consummation by it
of the transactions contemplated hereby do not and will not (i) violate the
limited partnership agreements of PCT LP, (ii) violate any provision of any law,
rule or regulation applicable to PCT LP, (iii) constitute a breach of, or result
in a default under, any existing material obligation of PCT LP under any
provision of any material agreement, contract or other instrument to which PCT
LP is a party or by which it or its property, if applicable, is bound, or (iv)
constitute a violation of any court or administrative order, writ, judgment or
decree that names PCT LP and is specifically directed to it or its property, if
applicable.
Section 5.06. No Brokers. PCT LP has not entered into, nor will it enter
----------
into, any agreement, arrangement or understanding with any person or firm which
will result in an obligation to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
Section 5.07. Litigation. To Acquiror's Knowledge, there are no actions,
----------
suits, arbitration, claims, attachments, proceedings, assignments for the
benefit of creditors, insolvency, bankruptcy, reorganization or other
proceedings, actual or proposed, pending or threatened in writing by or against
PCT LP or the PCT LP General Partner which would materially and adversely affect
PCT LP, the ownership or operation of its properties, or its ability to
consummate the transactions contemplated hereby. To Acquiror's Knowledge, there
is no outstanding order, writ, injunction or decree of any court, government,
governmental entity or authority or arbitration against or affecting PCT LP,
which in any such case would impair its ability to enter into and perform all of
its obligations under this Agreement and the transactions contemplated hereby.
ARTICLE 6. COVENANTS
Section 6.01. Conduct of the Business of FYA. FYA covenants and agrees
------------------------------
that between the Effective Date and the Closing Date, unless PCT LP has
consented in writing to any other act or omission (such consent not to be
unreasonably withheld, conditioned or delayed), FYA shall perform or observe the
following with respect to the real property held by FYA:
5
<PAGE>
(a) FYA will operate and maintain its real property in the ordinary
course of business and use all commercially reasonable efforts to preserve for
the Surviving Partnership the relationships with tenants, suppliers, managers,
employees and others having on-going relationships with such real property. FYA
will not defer taking any actions or spending any of its funds (including,
without limitation, the expenditures of funds consistent with past practice for
capital improvements on those projects commenced prior to the Effective Date),
or otherwise manage such property differently, due to the transactions
contemplated by this Agreement.
(b) FYA shall comply with all material terms, covenants and conditions
of its management contracts and service contracts.
(c) FYA shall not remove any personal property located in or on its
real property, except as may be required for repair and replacement or discarded
in the ordinary course of business. All replacements shall be free and clear of
liens and encumbrances except to the extent the original personal property was
so encumbered and shall be of quality at least equal to the replaced items.
(d) FYA shall, upon request of the Surviving Partnership at any time
after the Effective Date, assist the Surviving Partnership in its preparation of
audited statements of income and expense and such other documentation as PCT LP
may reasonably request, covering the period of FYA's ownership of its real
property.
(e) FYA will make all required payments within any applicable grace
period under any indebtedness secured by a lien on its real property and will
comply with all material terms, covenants and conditions under any such
indebtedness. FYA will pay all other accounts payable, including trade debt,
when due in accordance with its past business practices.
(f) FYA shall not cause or permit its real property, or any interest
therein, to be alienated, mortgaged, licensed, encumbered or otherwise be
transferred, except as such real property is so encumbered as of the Effective
Date.
(g) FYA will maintain and keep in full force and effect the hazard,
liability and casualty insurance it is currently maintaining with respect to its
real property.
(h) FYA shall promptly give PCT LP written notice of, and promptly
deliver to PCT LP, a true and complete copy of any written notice FYA may
receive, on or before the Closing Date, from any governmental authority
concerning a violation of any applicable legal requirements pertaining to its
real property.
(i) From and after the Effective Date, FYA shall not enter discussions
with, negotiate or contract with any other party for the sale of its real
property or any equity interests in FYA.
Section 6.02. Conduct of the Business of PCT LP. PCT LP covenants and
---------------------------------
agrees that between the Effective Date and the Closing Date, unless FYA has
consented in writing to any other act or omission (such consent not to be
unreasonably withheld, conditioned or delayed), PCT LP shall perform or observe
the following:
(a) PCT LP shall not merge or consolidate with any other person or
entity or otherwise, except pursuant to this Agreement, amend its agreement of
limited partnership.
(b) PCT LP shall continue to qualify as a partnership for federal
income tax purposes.
Section 6.03 No Solicitation. FYA shall not directly or indirectly, enter
---------------
into, solicit, initiate or continue any discussions or negotiations with, or
encourage or respond to any inquiries or proposals by, or
6
<PAGE>
participate in any negotiations with, or provide any information to, or
otherwise cooperate in any other way with, any person or entity other than PCT
LP and its respective officers, directors and representatives, concerning any
sale of all or a portion of FYA's assets, or any merger, consolidation,
liquidation, dissolution or similar transaction involving FYA.
Section 6.04 Confidentiality. The parties shall ensure that all
---------------
confidential information which each such party or any of its respective
representatives may now possess or may hereafter create or obtain relating to
the other party, the transactions contemplated hereby or the financial
condition, results of operations, business, properties, assets, liabilities or
future prospects of the other party, shall not be published, disclosed or made
accessible by any of them without the prior written consent of such other party;
provided, however, that the restrictions of this sentence shall not apply: (i)
- -------- -------
to the extent the disclosure may otherwise be required by applicable law, court
process or by obligations pursuant to any listing agreement with any national
securities exchange or (ii) to the extent such information shall have otherwise
become publicly available.
Section 6.05 Registration of Shares. PCT, Inc., the Surviving
----------------------
Partnership and the limited partners of the Surviving Partnership shall enter
into a registration rights agreement (the "Registration Rights Agreement"),
-----------------------------
substantially in the form of Exhibit B, on or prior to the Closing Date.
---------
ARTICLE 7. CONDITIONS TO CLOSING
The obligations of PCT LP and FYA to consummate the Merger are subject to
the satisfaction of the following conditions as of the Effective Time:
Section 7.01. Reincorporation Merger. The merger of Property Capital
----------------------
Trust, a Massachusetts business trust ("Old PCT"), into PCT Inc., contemplated
-------
by that certain Agreement and Plan of Merger dated as of June 18, 1998 and
amended as of August 7, 1998 and as of the date hereof (the "Reincorporation
---------------
Merger Agreement" and such merger (the "Reincorporation Merger") shall occur
- ---------------- ----------------------
prior to the Closing.
Section 7.02. Consummation of the Investment Agreement. The
----------------------------------------
transactions contemplated by the Investment Agreement dated as of June 18, 1998
and amended as of August 7, 1998 and as of the date hereof by and among Old PCT,
PCT Inc. and the Purchasers (as such term is defined therein) (the "Investment
----------
Agreement") shall have been consummated.
- ---------
Section 7.03 Approval by Partners. The partners of the PCT LP and
--------------------
FYA shall have approved this Agreement and the transactions contemplated
hereunder, in each case as required by the terms of the partnership agreement of
such partnership
Section 7.04. No Violations. There shall have been no violations of
-------------
any provisions of any applicable law or regulation and no judgment, injunction,
order or decree shall prohibit the consummation of the Merger.
Section 7.05. Consents. All actions by or in respect of or filings
--------
with any governmental body, agency, official or authority required to permit the
consummation of the Merger shall have been obtained.
Section 7.07. Representations and Warranties. Each of the
------------------------------
representations and warranties of FYA and PCT LP contained in Articles 4 and 5
shall be true and correct in all material respects and each of FYA and PCT LP
shall have performed all of their respective obligations hereunder which by the
terms hereof are to be performed on or before the Closing.
7
<PAGE>
Section 7.08. No Material Adverse Change. There shall have been no
--------------------------
material adverse change in the financial condition, prospects, properties,
assets, liabilities, business or operations of FYA or PCT LP since the date
hereof.
ARTICLE 8. TERMINATION
Section 8.01. Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time:
(a) by mutual written consent of the PCT LP General Partner, on behalf
of PCT LP, and each of the FYA General Partners, on behalf of FYA;
(b) by either the PCT General Partner, on behalf of PCT LP, or the FYA
General Partners, on behalf of FYA, if there shall be any law or regulation that
makes consummation of the Merger illegal or otherwise prohibited, or if any
judgment, injunction, order or decree enjoining PCT LP or FYA from consummating
the Merger is entered and such judgment, injunction, order or decree shall
become final and nonappealable; or
(c) if the Investment Agreement shall have been terminated in
accordance with its terms.
Section 8.02. Effect of Termination. If this Agreement is terminated
---------------------
pursuant to Section 8.01, this Agreement shall become void and of no effect with
no liability on the part of either party hereto.
ARTICLE 9. MISCELLANEOUS
Section 9.01. General Partner Authorization. The general partner of the
-----------------------------
Surviving Partnership shall be authorized, at such time in its sole discretion
as it deems appropriate, to prepare, execute, acknowledge, verify, deliver, file
and record, for and in the name of FYA and, to the extent necessary, the PCT LP
General Partner, the limited partner of PCT LP, the FYA General Partners and the
FYA Limited Partners, any and all documents and instruments including, without
limitation, the Partnership Agreement and the Certificate of Merger and shall do
and perform any and all acts required by applicable law which the general
partner of the Surviving Partnership deems necessary or advisable, in order to
effectuate the Merger.
Section 9.02. Survival of Representations and Warranties. The
------------------------------------------
representations and warranties made by FYA and PCT LP herein shall be deemed to
have been relied upon by the PCT LP and FYA, respectively, shall survive the
Closing and shall not merge in the performance hereof; provided, however, that
such representations and warranties shall expire on the one (1) year anniversary
of the Closing.
Section 9.03. Amendments; No Waivers.
----------------------
(a) Any provision of this Agreement may be amended or waived prior to
the Effective Time if, and only if, such amendment or waiver is in writing and
signed by the PCT LP General Partner, on behalf of PCT LP, and by the FYA
General Partner, on behalf of FYA.
(b) No failure or delay by any party hereto in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
8
<PAGE>
Section 9.04. Integration. All prior or contemporaneous agreements,
-----------
contracts, promises, representations, and statements, if any, between FYA and
PCT LP, or their representatives, are merged into this Agreement, and this
Agreement shall constitute the entire understanding between FYA and PCT LP with
respect to the subject matter hereof.
Section 9.05. Successors and Assigns. The provisions of this Agreement
----------------------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, provided that no party may assign, delegate
or otherwise transfer any of its rights or obligations under this Agreement
without the consent of the other party hereto.
Section 9.06. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the domestic laws of The Commonwealth of
Massachusetts without giving effect to any choice or conflict of law provision
or rule (whether of the Commonwealth of Massachusetts or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
Commonwealth of Massachusetts.
Section 9.07. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 9.08. Third Party Beneficiary. No provision of this Agreement is
-----------------------
intended, nor shall it be interpreted, to provide or create any third party
beneficiary rights or any other rights of any kind in any customer, affiliate,
stockholder, partner, director, officer or employee of any party hereto or any
other person or entity.
Section 9.09. Notices. Any notice or demand that must or may be given
-------
under this Agreement or by law, to either FYA or PCT LP, shall, except as
otherwise provided, be in writing and shall be deemed to have been given (i)
when physically received by personal delivery (which shall include the confirmed
receipt of a telecopied facsimile transmission), (ii) three business days after
being deposited in the United States certified or registered mail, return
receipt requested, postage prepaid, or (iii) one business day after being
deposited with a nationally known commercial courier service providing next day
delivery service (such as Federal Express); addressed and delivered or
telecopied:
c/o The Beal Companies
177 Milk Street
Boston, MA 02109-3410
Fax: (617) 451-1801
Attn: Bruce A. Beal
with a copy to:
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, MA 02109
Fax: (617) 523-1231
Attn: David P. Ries, P.C.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized representatives as of the day and
year first above written.
FRAMINGHAM YORK ASSOCIATES LIMITED PARTNERSHIP
By: /s/ Bruce A. Beal
--------------------------------------------
Bruce A. Beal, as General Partner
By: /s/ Robert L. Beal
--------------------------------------------
Robert L. Beal, as General Partner
PROPERTY CAPITAL TRUST, L.P.
By: Maryland Property Capital Trust, Inc., as
sole General Partner
By: /s/ Robert L. Beal
--------------------------------------------
Name: Robert L. Beal
Title: Secretary
/s/ Michael A. Manzo
--------------------------------------------
Michael A. Manzo, Sole Limited Partner
Solely for the purposes of Section 6.04 and 6.05:
MARYLAND PROPERTY CAPITAL TRUST, INC.
By: /s/ Robert L. Beal
--------------------------------------------
Name: Robert L. Beal
Title: Secretary
10
<PAGE>
ADDENDUM
TO CONTRIBUTION AND MERGER AGREEMENT
This ADDENDUM TO CONTRIBUTION AND MERGER AGREEMENT ("Addendum") is
--------
entered into as of ____ ____, 1998 by and among ________________________ (the
"Contributing Partner"), and Property Capital Trust Limited Partnership, a
- ---------------------
Massachusetts limited partnership ("PCT LP" or the "Acquiring Partnership").
------ ---------------------
WHEREAS, the Acquiring Partnership and Framingham York Associates
Limited Partnership, a Massachusetts limited partnership ("FYA") have entered
---
into a Contribution and Merger Agreement dated October 7, 1998 (the "Agreement")
---------
pursuant to which the Acquiring Partnership has agreed to merge into FYA; and
WHEREAS, the Contributing Partner is one of the partners of FYA and
desires to enter into this Addendum for the purpose of consenting to and
otherwise facilitating the consummation of the transactions contemplated by the
Agreement.
NOW, THEREFORE, in consideration of the foregoing, of the covenants,
promises and undertakings set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. All capitalized terms contained herein, unless otherwise defined
herein, shall have the meanings ascribed to them in the Agreement.
2. By its signature hereto, the Contributing Partner hereby agrees
to be bound by the terms and conditions of the Agreement with the same force and
effect as if he, she or it were an original signatory thereto.
3. In order to induce the Acquiring Partnership to enter into this
Addendum and to perform its respective obligations hereunder and pursuant to the
Agreement, the Contributing Partner hereby warrants and represents with respect
to itself and with respect to FYA, the following:
A. Representations and Warranties of FYA. To the knowledge of
-------------------------------------
the Contributing Partner, all representations and warranties of FYA in Article 4
of the Agreement are true and correct in all material respects.
B. Title to Partnership Interest. The Contributing Partner owns
-----------------------------
beneficially and of record, free and clear of any voting agreement, option,
charge, security interest, mortgage, deed of trust, encumbrance, rights of
assignment or purchase rights (collectively "Encumbrances") its partnership
------------
interest in FYA.
C. No Agreements to Sell. The Contributing Partner has not made
---------------------
any agreement with, and does not have any obligation (absolute or contingent)
to, any other person or firm to sell, transfer or in any way encumber its
partnership interest in FYA or to not sell such partnership interests, or to
enter into any agreement with respect to a sale, transfer or encumbrance of, or
put or call right with respect to, such partnership interest.
D. Legend. The Contributing Partner hereby acknowledges that
------
the interests in the Surviving Partnership (the "Equity Securities") to be
-----------------
acquired by the Contributing Partner upon consummation of the Merger are being
issued and sold in a transaction not involving any public offering within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), and
--------------
that the Equity Securities have not been registered
11
<PAGE>
under the Securities Act. Without prejudice to the Contributing Partner's right
at all times to sell or otherwise dispose of all or any part of the Equity
Securities pursuant to an effective registration statement under the Securities
Act or under an exemption from registration available under the Securities Act,
the Contributing Partner hereby agrees not to offer, sell, transfer or otherwise
dispose of any of the Equity Securities it is issued pursuant to the
Contribution Agreement in the absence of registration unless the Contributing
Partner delivers to the Company and the Surviving Partnership an opinion of a
lawyer experienced in securities matters and reasonably satisfactory to the
Surviving Partnership, in form and substance reasonably satisfactory to the
Surviving Partnership, to the effect that the proposed sale, transfer or other
disposition may be effected without registration under the Securities Act and
under applicable state securities or "blue sky" laws. The Contributing Partner
hereby further acknowledges that any certificate representing the Equity
Securities shall bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT
BE TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH A SATISFACTORY OPINION
OF COUNSEL FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE, HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT AND THE RULES AND
REGULATIONS THEREUNDER AND UNDER APPLICABLE STATE SECURITIES OR "BLUE
SKY LAWS."
E. Accredited Investor; Investment Intent. The Contributing Partner
--------------------------------------
is an "accredited investor" as defined in Regulation D promulgated under the
Securities Act. Any Equity Securities acquired by the Contributing Partner will
be so acquired for the Contributing Partner's own account for investment only
and not with a view to, or with any intention of, a distribution or resale
thereof, in whole or in part, in violation of the Securities Act or state
securities or "blue sky", laws without prejudice to the Contributing Partner's
right at all times (subject to the terms hereof and of the agreement of limited
partnership of the Surviving Partnership) to sell or otherwise dispose of all or
any part of the Equity Securities pursuant to an effective registration
statement under the Securities Act or under an exemption from registration
available under the Securities Act.
F. Transfers. The Contributing Partner agrees that (i) for one (1)
---------
year from the Closing Date he, she or it will not, without the consent of the
Surviving Partnership, offer, pledge, sell, contract to sell, grant any option
for the sale of, seek the redemption of or otherwise transfer or dispose of,
directly or indirectly, any Equity Securities (the "Lock-Up Period") and (ii)
--------------
after the Lock-Up Period he, she or it will only transfer the Equity Securities
to persons or entities that make representations to the Transferee of the type
set forth in Sections 3(r) and 3(s) hereof, and otherwise so as to cause no
violation of applicable federal and state securities laws by the Surviving
Partnership, and no transfer in contravention of such agreement shall be
recognized by the Surviving Partnership.
G. Non-Foreign Status. The Contributing Partner is not a foreign
------------------
person, foreign corporation, foreign partnership, foreign limited liability
company, foreign trust or foreign estate (as defined in the Internal Revenue
Code of 1986, as amended (the "Code")) and, therefore, the Contributing Partner
----
is not subject to the provisions of the Code relating to the withholding of
sales proceeds to foreign persons.
12
<PAGE>
4. Waiver of Rights; Consents with Respect to the Partnership Interest.
-------------------------------------------------------------------
The Contributing Partner acknowledges that the agreements contained in and
the transactions contemplated by the Agreement and any actions taken by the FYA
General Partner in contemplation of the transactions contemplated thereby may
conflict with, and may not have been contemplated by (i) the limited partnership
agreement and other organizational documents of FYA, or (ii) other agreements
among the Contributing Partner and other holders of partnership interests in
FYA. The Contributing Partner expressly gives all Consents (and any consents
necessary to authorize the proper parties in interest to give all Consents) and
Waivers necessary or desirable to facilitate any Conveyance Action relating to
such entity (as each such capitalized term is hereinafter defined).
As used herein, the term "Conveyance Action" means, with respect to FYA,
-----------------
(i) the conveyance or agreement to convey by any holder of an interest therein
of its direct or indirect interest in such entity to the Surviving Partnership
in connection with the transactions contemplated by the Agreement, or (ii) the
entering into by any such holder of any agreement relating to (x) the
transactions contemplated by the Agreement, including the Merger, (y) the direct
or indirect acquisition by the Acquiring Partnership of any such direct or
indirect interest, or (z) all other transactions relating thereto, or (iii) the
taking by any such holder of any action necessary or desirable to facilitate any
of the foregoing, including, without limitation, the following (provided that
--------
the same are taken in furtherance of the foregoing): any sale or distribution
to any person of a direct or indirect interest in such entity, the entering into
any agreement with any person that grants to such person the right to purchase a
direct or indirect interest in such entity, and the giving of the Consents and
Waivers contained in this Section 4 or consents or waivers similar thereto in
form or purpose. As used herein, the term "Consents" means, with respect to
--------
FYA, any consent necessary or desirable under the limited partnership agreement
and other organizational documents of FYA or any other agreement among all or
any of the holders of interests therein or any other agreement relating thereto
or referred to therein (x) to permit any and all Conveyance Actions or to amend
such organizational documents and/or other agreements so that no provision
thereof prohibits, restricts, impairs or interferes with any Conveyance Action
(such amendments to include, without limitation, the deletion of provisions
which cause a default under such agreement if interests therein are transferred
for cash or for property or in violation of notice, rights-of-first refusal or
other provisions), (y) to admit any person as an additional or substitute
partner upon the Acquiring partnership's acquisition of FYA and to adopt all
such amendments as may be necessary or desirable to effect such admission, and
(z) to continue any entity following the transfer of interests therein to any
other entity. As used herein, the term "Waivers" means, with respect to FYA, the
-------
waiving of any and all rights that the Contributing Partner may have with
respect to, and (to the extent possible) that any other person may have with
respect to, or that may accrue to the Contributing Partner or other person upon
the occurrence of, a Conveyance Action, including, but not limited to, the
following rights: rights of notice, rights to response periods, rights to
purchase the direct or indirect interests of another holder of or interests in
such entity or to sell the Contributing Partner's or other person's direct or
indirect interest therein to another holder of or interests in, rights to sell
the Contributing Partner's or other person's direct or indirect interest therein
at a price other than as provided herein, or rights to prohibit, limit,
invalidate, otherwise restrict or impair any such Conveyance Action or to cause
a termination or dissolution of such entity because of such Conveyance Action.
The Waivers and Consents contained in this Section 4 shall terminate in the
event of and upon the termination of the Agreement.
5. Power of Attorney.
-----------------
The Contributing Partner hereby irrevocably appoints Bruce A. Beal or
Robert L. Beal or any substitute designated by such person or successor thereof
from time to time (such persons or any such substitute or successor acting in
the capacity of Attorney-in-Fact pursuant to this Section 5, the "Attorney-in-
-----------
Fact"), as the true and lawful Attorney-in-Fact and agent of the Contributing
- ----
Partner, with the power to act in the name, place and stead of the Contributing
Partner to make, execute, acknowledge and deliver all such other contracts,
orders, receipts,
13
<PAGE>
notices, requests, instructions, certificates, consents, letters and other
writings (including without limitation the documents to be executed in
connection with the Closing, instruments relating to Conveyance Actions, limited
partnership agreements of the Acquiring Partnership, any other documents
relating to the acquisition by the Acquiring Partnership of FYA, and any
consents and waivers given or contemplated by or in furtherance of this Addendum
or the Agreement) and, in general, to do all things and to take all action which
the Attorney-in-Fact in its sole discretion may consider necessary or proper in
connection with or to carry out the transactions contemplated by this Addendum
or the Agreement, and any other documents to be executed in connection with the
Closing as fully as could the Contributing Partner if personally present and
acting.
The Power of Attorney granted by the Contributing Partner pursuant to this
Section 5 and all authority conferred hereby is granted and conferred subject to
and in consideration of the interests of the Acquiring Partnership and is for
the purpose of completing the transactions contemplated by the Agreement. The
Power of Attorney granted by this Section 5 and all authority conferred hereby
is coupled with an interest and therefore shall be irrevocable and shall not be
terminated by any act of the Contributing Partner or by operation of law,
whether by the death, disability, incapacity or liquidation of the Grantor or by
the occurrence of any other event or events (including without limitation the
termination of any trust or estate for which the Contributing Partner is acting
as a fiduciary or fiduciaries), and if, after the execution hereof, the
Contributing Partner shall die or become disabled or incapacitated or is
liquidated, or if any other such event or events shall occur before the
completion of the transactions contemplated by the Agreement, the Attorney-in-
Fact shall nevertheless be authorized and directed to complete all such
transactions as if such death, disability, incapacity, liquidation or other
event or events had not occurred and regardless of notice thereof. The
Contributing Partner acknowledges that the Attorney-in-Fact named in the first
paragraph of this Section 5 have, and any substitute or successor thereof acting
as Attorney-in-Fact may have, an economic interest in the transactions
contemplated by the Agreement. The Contributing Partner agrees that, at the
request of the Acquiring Partnership, it will promptly execute a separate Power
of Attorney on the same terms set forth in this Section 5, such execution to be
witnessed and notarized if so requested by an Attorney-in-Fact.
It is understood that the Attorney-in-Fact assumes no responsibility or
liability to any person by virtue of the Power of Attorney granted by the
Contributing Partner hereby. The Attorney-in-Fact makes no representations with
respect to and shall have no responsibility for the Merger and shall not be
liable for any error of judgment or for any act done or omitted or for any
mistake of fact or law except for his own gross negligence or willful
misconduct. The Contributing Partner agrees to indemnify the Attorney-in-Fact
for and to hold the Attorney-in-Fact harmless against any loss, claim, damage or
liability incurred on his part arising out of or in connection with it acting as
the Attorney-in-Fact under the Power of Attorney created by the Contributing
Partner hereby, as well as the cost and expense of investigating and defending
against any such loss, claim, damage or liability, except to the extent such
loss, claim, damage or liability is due to the gross negligence or willful
misconduct of the Attorney-in-Fact. The Contributing Partner agrees that an
Attorney-in-Fact may consult with counsel of his own choice (who may be counsel
for FYA or the Acquiring Partnership) and he shall have full and complete
authorization and protection for any action taken or suffered by him hereunder
in good faith and in accordance with the advice of such counsel.
The Contributing Partner does hereby ratify and confirm all that the
Attorney-in-Fact shall lawfully do or cause to be done by virtue of the exercise
of the powers granted unto him by such Contributing Partner under this Section
5, and such Contributing Partner authorizes the reliance of third parties on
this Power of Attorney and waives his, her or its rights, if any, as against any
such third party for its reliance hereon.
14
<PAGE>
IN WITNESS WHEREOF, the parties have entered into this Addendum to the
Contribution and Merger Agreement as of the date and year first written above.
[SIGNATURE BLOCKS TO COME]
<PAGE>
FORM OF AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP OF THE SURVIVING PARTNERSHIP
For a copy of the Form of Amended and Restated Agreement of Limited
Partnership of the Surviving Partnership see Exhibit 4.1 to the Registration
Statement on Form S-4 for Maryland Property Capital Trust, Inc. filed with the
Securities and Exchange Commission on November 20, 1998
<PAGE>
Exhibit B to Contribution and Merger Agreement
----------------------------------------------
FORM OF
REGISTRATION RIGHTS AGREEMENT
(Shares issued upon redemption of OP units)
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is entered into as of
---------
____________, 1998 by and among Maryland Property Capital Trust, Inc., a
Maryland corporation (the "Company"), and the Holders (as hereinafter defined).
-------
This Agreement is made pursuant to a certain Contribution and Merger
Agreement (the "Contribution Agreement") dated October __, 1998 by and among
----------------------
Property Capital Trust Limited Partnership, a Massachusetts limited partnership,
and Framingham York Associates Limited Partnership, a Massachusetts limited
partnership (the "Operating Partnership"), and, solely for purposes of Section
---------------------
6.04 and Section 6.05 of the Contribution Agreement, the Company. Pursuant to
the Contribution Agreement, the Operating Partnership, which shall have changed
its name to "Property Capital Trust Limited Partnership," shall issue to the
Holders on the date hereof (the "Closing Date") common units of limited
------------
partnership interest ("Units") in the Operating Partnership, which may be
-----
redeemed for shares of the Company's common stock, $.01 par value (the "Common
------
Stock"), upon the terms and provisions set forth in the Agreement of Limited
- -----
Partnership for the Operating Partnership, as the same may be amended and
restated from time to time (the "Partnership Agreement"). The execution of this
---------------------
Agreement is a condition to the closing of the transactions contemplated by the
Contribution Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. CERTAIN DEFINITIONS.
-------------------
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Holder" or "Holders" means any holder of outstanding Registrable
------ -------
Securities (i) who is identified on the signature pages attached hereto or (ii)
a Person to which the registration rights provided for in this Agreement shall
have been properly assigned or otherwise transferred in accordance with Section
13 hereof.
"Person" means a natural person, partnership (whether general or limited),
------
trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or representative capacity.
"Prospectus" means the prospectus included in a Registration Statement,
----------
including any preliminary prospectus, as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Shares covered by such Registration Statement, and by all
other amendments and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Registrable Shares" means shares of Common Stock issued or to be issued to
------------------
the Holder upon redemption of, or in exchange for, their Units in accordance
with the Partnership Agreement, excluding (A) Common Stock for which a
Registration Statement relating to the sale thereof shall have been declared
effective under the Securities Act of 1933, as amended (the "Securities Act"),
--------------
and which have been disposed of under such Registration Statement, (B) Common
Stock sold pursuant to Rule 144 (or any successor provision) under the
<PAGE>
Securities Act or (C) Common Stock eligible for sale pursuant to Rule 144(k) (or
any successor provision) under the Securities Act.
"Registration Expenses" means any and all expenses incident to performance
---------------------
of or compliance with this Agreement, including, without limitation: (i) all
SEC, stock exchange or National Association of Securities Dealers, Inc. ("NASD")
----
registration or filing fees; (ii) all fees and expenses incurred in connection
with compliance with state securities or "blue sky" laws (including reasonable
fees and disbursements of counsel in connection with "blue sky" qualification of
any of the Registrable Shares and the preparation of a Blue Sky Memorandum) and
compliance with the rules of NASD; (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, certificates and other documents
relating to the performance of and compliance with this Agreement; (iv) all fees
and expenses incurred in connection with the listing, if any, of the Registrable
Shares on any securities exchange or exchanges pursuant to Section 3(i) hereof,
and (v) the fees and disbursements of counsel for the Company and the
independent public accountants of the Company, including the expenses of any
special audit or "cold comfort" letters required by or incident to such
performance and compliance. Registration Expenses shall specifically exclude
underwriting discounts and commissions relating to the sale or disposition of
Registrable Shares by a selling Holder, the fees and disbursement of counsel
representing the selling Holder, and stamp, transfer, sales and similar taxes,
if any, relating to the sale or disposition of Registrable Shares by a selling
Holder, all of which shall be borne by such Holder in all cases.
"Registration Statement" means any registration statement of the Company
----------------------
which covers the issuance or resale, as applicable, of any Registrable Shares on
an appropriate form under Rule 415 promulgated under the Securities Act, or any
similar rule that may be adopted by the SEC, and all amendments and supplements
to such registration statement, including post-effective amendments, in each
case including the Prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.
2. REGISTRATION.
------------
(a) Demand Registration. (i) Subject to the conditions set forth in this
-------------------
Agreement, after the later to occur of (i) the 30th day following the date on
which the Company becomes eligible to file a Registration Statement on Form S-3
or a similar "short form" registration statement or (ii) the first anniversary
of the date hereof, while Registrable Shares or the Units issued on the Closing
Date are outstanding, any Holder or Holders of at least one-quarter ( 1/4) of
the Units issued on the Closing Date may request, in connection with the
redemption of such Units for Common Stock pursuant to and in accordance with the
Partnership Agreement, that the Company cause to be filed a Registration
Statement providing for the sale by such Holders of all or part of such Holders'
Registrable Shares in the manner specified in such request, including an
underwritten offering in accordance with the terms hereof (each a "Demand
------
Registration"). Within ten (10) days after receipt of a request for a Demand
- ------------
Registration, the Company shall promptly give written notice of such proposed
registration to all other Holders. Such Holders shall have the right, by giving
written notice to the Company within fifteen (15) days after such notice
referred to in the preceding sentence has been given by the Company to elect to
have included in the Registration Statement pursuant to a Demand Registration
such of their Registrable Shares as each Holder may request in such notice of
election. Thereupon, the Company shall use all commercially reasonable efforts
to cause such Registration Statement to be declared effective by the Securities
and Exchange Commission (the "SEC") for all Registrable Shares which the Company
---
has been requested to register no later than ninety (90) days following the
expiration of such fifteen (15) day period. The Company agrees to use all
commercially reasonable efforts to keep the Registration Statement pursuant to a
Demand Registration continuously effective until the earliest of (a) the date on
which the Holders no longer hold any Registrable Shares registered under such
Registration Statement, (b) the date on which the Registrable Shares are
eligible for sale by the Holders pursuant to Rule 144(k) (or any successor
provision) promulgated under the Securities Act or (c) the date which is six (6)
months from the
<PAGE>
effective date of such Registration Statement; provided, however, that such six
(6) month period shall be tolled during the period the Holders' disposition of
Registrable Shares pursuant to a Demand Registration is suspended because of an
event described in Section 3(b). The Company shall not be obligated under this
Section 2(b): (i) to effect more than one Demand Registration in any twelve-
month period, (ii) to effect more than three Demand Registrations, in the
aggregate, on behalf of the Holders.
(ii) If the method of disposition specified by the Holder or Holders
requesting a Demand Registration shall be an underwritten public offering, the
Company may designate the managing underwriter of such offering, subject to the
approval of such Holder or Holders which approval shall not be unreasonably
withheld, delayed or conditioned and shall, in connection therewith, (i) enter
into agreements customary in connection therewith (including an underwriting
agreement in customary form) and reasonably acceptable to the Company, (ii)
promptly make available to the Holder or Holders all financial and other records
as shall be reasonably necessary to enable them to exercise their due diligence
responsibilities, (iii) furnish to each Holder and each underwriter, if any, a
signed counterpart, addressed to such Holder or underwriter of (A) an opinion or
opinions of counsel to the Company and (B) a cold comfort letter or letters from
the Company's independent public accountants and (iv) incorporate in a
Prospectus supplement or post effective amendment such information as such
managing underwriter or underwriters requests. If the managing underwriters
advise the Company in writing that in their opinion the number of Registrable
Shares requested to be included in such offering exceeds the maximum number
which can be included in such offering (1) at a price reasonably related to the
then current market value of the Company's Common Stock or (2) without adversely
affecting the marketability of the offering (the "Maximum Number"), then the
--------------
Company will limit the number of Registrable Shares included in such offering to
the Maximum Number, and the Registrable Shares offered shall be selected in the
following order of priority (A) first, the Registrable Shares, if any, to be
offered for the account of the Holders (including the Holder or Holders making
the Demand Registration); provided, however, that such number of Registrable
-------- -------
Shares shall be reduced pro-rata on the basis of relative number of any
Registrable Shares requested by each such Holder to be included in such
registration to the extent necessary to reduce the total number of securities of
the Holders offered to the Maximum Amount and (B) second, the securities the
Company proposes to sell pursuant to Section 7.
(b) Registration Statement Covering Issuance of Common Stock. In lieu of
--------------------------------------------------------
the registration rights set forth in Section 2(a) above, the Company may, in its
sole discretion, prior to the first date upon which the Units held by the
Holders may be redeemed pursuant to the Partnership Agreement (or such other
date as may be required under applicable provisions of the Securities Act) file
a Registration Statement relating to the issuance to Holders of shares of Common
Stock upon the redemption or in exchange for their Units. Thereupon, the
Company shall use all commercially reasonable efforts to cause such Registration
Statement to be declared effective by the SEC for all shares of Common Stock
covered thereby. The Company agrees to use all commercially reasonable efforts
to keep such Registration Statement continuously effective until the earlier to
occur of (i) the date which is the 10th anniversary of the date hereof and (ii)
date on which each Holder has redeemed or exchanged all of such Holder's Units
for Common Stock. In the event that the Company is unable to cause such
Registration Statement to be declared effective by the SEC or is unable to keep
such Registration Statement effective until the earlier of the dates specified
in clause (i) and (ii) in the immediately preceding sentence, then the rights of
each Holder set forth in Sections 2(a) and (b) above shall be restored.
(c) Notwithstanding any thing to the contrary set forth herein, no Holder
shall have any rights under this Section 2 to request the Company, and the
Company shall have no obligation, to use all commercially reasonable efforts to
cause a Registration Statement to be declared effective by the SEC at any time
after the Common Stock issued to such Holder is (A) sold pursuant to Rule 144
(or any successor provision) under the Securities Act or (B) is eligible for
sale pursuant to Rule 144(K) or any successor provision under the Securities
Act.
<PAGE>
(d) If after a Demand Registration Statement has been declared effective,
the offering of Registrable Shares pursuant to such Demand Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such Demand
Registration Statement will be deemed not to have become effective during the
period of such interference until the offering of Registrable Shares pursuant to
such Demand Registration Statement may legally resume.
(e) In the event that the Company shall default in its obligation to file a
Registration Statement within the time period specified in Section 2(a) other
than as a result of any act or omission of a Holder and a Holder shall be
required to undertake any steps to cause the Company to comply with this
Agreement with respect thereto following such default, the Company shall
promptly reimburse such Holder for all reasonable out-of-pocket costs
(including, without limitation, all reasonable attorneys' fees and expenses)
incurred by such Holder in connection with the enforcement of the Company's
obligation to so file (including the reasonable out-of-pocket costs of legal and
other professional advice preparatory to such enforcement).
3. REGISTRATION PROCEDURE.
----------------------
Whenever required under Section 2 to use all commercially reasonable
efforts to effect the registration of any Registrable Shares, the Company shall,
to the extent applicable:
(a) subject to the last five sentences of Section 3(b), prepare and file
with the SEC a Registration Statement with respect to such Registrable Shares
and use all commercially reasonable efforts to cause such Registration Statement
to become and remain effective for the applicable period as provided in Section
2.
(b) subject to the last five sentences of this Section 3(b), prepare and
file with the SEC from time to time such amendments and supplements to the
Registration Statement and Prospectus used in connection therewith as may be
necessary to keep the Registration Statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of all the
Registrable Shares throughout the applicable period. Notwithstanding anything to
the contrary contained herein, the Company shall not be required to take any of
the actions described in the previous sentence, in Section 3(a), 3(d) or Section
3(g) to the extent that (i) in the reasonable opinion of the Company (A)
securities laws applicable to such sale would require the Company to disclose
material non-public information ("Non-Public Information") and (B) the
---------- -----------
disclosure of such Non-Public Information would materially adversely affect the
Company; (ii) such sale would occur during the measurement period for
determining the amount of Common Stock in connection with the acquisition of a
business or assets by the Company (the "Measurement Period"); or (iii) the
------------------
Company is contemplating an underwritten or non-underwritten public offering of
its securities and in the reasonable opinion of the underwriters (or the
Company, in the case of a non-underwritten public offering) such sale would
interfere materially with such public offering by the Company (a "Financing
---------
Period"); and in the event of (i), (ii) or (iii) the Company simultaneously
- ------
delivers written notice to the Holders to the effect that the Holders may not
make offers or sales under the applicable Registration Statement for a period
not to exceed sixty (60) days from the date of such notice; provided, however,
-------- -------
that the Company may only deliver two such notices within any twelve-month
period and shall not deliver such notices consecutively in any twelve-month
period. In the event the sale by the Holders is suspended because of the
existence of Non-Public Information, the Company will notify the Holders
promptly upon such Non-Public Information being included by the Company in a
filing with the SEC, being otherwise disclosed to the public (other than through
the action of any Holder), or ceasing to be material to the Company, and upon
such notice being given by the Company, the Holders shall again, subject to the
last paragraph of this Section 3, be entitled to sell Registrable Shares as
provided herein. In the event the sale by the Holders is suspended because it
is proposed to be made during the Measurement Period or the Financing Period, as
applicable, the Company shall specify, in notifying the Holders of the
suspension of the sale, when the Measurement Period or Financing Period, as
applicable, will end, at which time the Holders shall again, subject to the last
paragraph of this Section 3, be
<PAGE>
entitled to sell Registrable Shares as provided herein. If the Measurement
Period or the Financing Period, as applicable, is thereafter changed (but in no
event to a date after the applicable sixty (60) day period), the Company will
promptly notify the Holders of such change and upon the end of the Measurement
Period or Financing Period as so changed, the Holders shall again, subject to
the last paragraph of this Section 3, be entitled to sell Registrable Shares as
provided herein. If an agreement to which such Measurement Period or Financing
Period, as applicable, relates is terminated prior to the end of the Measurement
Period or Financing Period, as applicable, the suspension period hereunder shall
end immediately and the Company shall promptly notify the Holders of the end of
the suspension period.
(c) furnish to the Holders such numbers of copies of the Registration
Statement and Prospectus included therein in conformity with the requirements of
the Securities Act and such other documents and information as they may
reasonably request.
(d) use all commercially reasonable efforts to register or qualify, and
maintain the registration and qualification of, the Registrable Shares covered
by such Registration Statement under such other securities or "blue sky" laws of
such jurisdictions within the United States and its territories as shall be
reasonably appropriate for the distribution of the Registrable Shares covered by
a Registration Statement; provided, however, that the Company shall not be
-------- -------
required in connection therewith or as a condition thereto to qualify to do
business in or to file a general consent to service of process in any
jurisdiction wherein it would not but for the requirements of this paragraph (d)
be obligated to do so; and provided further, that the Company shall not be
-------- -------
required to subject itself to taxation in any jurisdiction or to qualify such
Registrable Shares in any jurisdiction in which the securities regulatory
authority requires that any Holder submit any of its Registrable Shares to the
terms, provisions and restrictions of any escrow, lockup or similar agreement(s)
for consent to sell Registrable Shares in such jurisdiction unless such Holder
agrees to do so.
(e) promptly notify each Holder for whom Registrable Shares are covered by
the applicable Registration Statement, and confirm in writing (i) when the
Registration Statement and any post-effective amendments thereto have become
effective, (ii) when any amendment or supplement to the Prospectus contained in
such Registration Statement has been filed with the SEC, (iii) of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration
Statement or the initiation of any proceedings for that purpose, or the
suspension of any qualification under "blue sky" laws, (iv) at any time when a
Prospectus relating to such Registration Statement is required to be delivered
under the Securities Act, of the happening of an event as a result of which the
Prospectus included in such Registration Statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made.
(f) use all commercially reasonable efforts to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment.
(g) subject to the last five sentences of Section 3(b), upon the occurrence
of any event contemplated by clause (iv) of Section 3(e), use all commercially
reasonable efforts promptly to prepare and file an amendment or a supplement to
the Prospectus contained in the applicable Registration Statement or any
document incorporated in such Prospectus by reference or prepare, file and
obtain effectiveness of a post-effective amendment to such Registration
Statement, or file any other required document, in any case to the extent
necessary so that, as thereafter delivered to the purchasers of such Registrable
Shares, such Prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances under
which they were made.
(h) otherwise use all commercially reasonable efforts to comply with all
<PAGE>
applicable rules and regulations of the SEC.
(i) use all commercially reasonable efforts to list the Registrable Shares
covered by a Registration Statement with any securities exchange on which the
Common Stock of the Company is then listed.
(j) If the Company shall hereafter enter into any registration rights or
similar agreement which grants any holder of Common Stock liquidated damages or
similar penalties for failure of the Company to file a registration statement
and/or cause a registration statement to become or remain effective with respect
to such Common Stock, the Holders hereunder shall be entitle to comparable and
proportionate rights and penalties (taking into account the relative number of
shares of Common Stock) with respect to Registrable Shares then outstanding
hereunder.
In connection with and as a condition to the Company's obligations with
respect to any Registration Statements required to be filed pursuant to Section
2 and this Section 3, each Holder agrees that (i) it will not offer or sell its
Registrable Shares under any Registration Statement until it has received copies
of the Prospectus as then supplemented or amended as contemplated by Section
3(c) and receives notice from the Company that the Registration Statement and
any post-effective amendment thereto have become effective as contemplated in
Section 3(e), (ii) upon receipt of any notice from the Company contemplated by
Section 3(e)(iii), such Holder will forthwith discontinue disposition of the
Registrable Shares pursuant to the applicable Registration Statement until the
Company obtains the withdrawal of any order suspending the effectiveness of such
Registration Statement, (iii) upon receipt of any notice from the Company
contemplated by Section 3(b), such Holder will forthwith discontinue disposition
of the Registrable Shares pursuant to the applicable Registration Statement
until (a) the expiration of the Measurement Period or Financing Period, as
applicable, or the receipt of a notice from the Company that the Non-Public
Information has been included in a filing with the SEC or has otherwise been
disclosed to the public or has ceased to be material to the Company as provided
in Section 3(b) and (b) if applicable, the Holder receives copies of the
supplemented or amended Prospectus contemplated by Section 3(g) and receives
notice that any post-effective amendment has become effective, and (iv) upon
receipt of any notice from the Company contemplated by Section 3(e)(iv) (in
respect of the occurrence of an event contemplated therein), such Holder will
forthwith discontinue disposition of the Registrable Shares pursuant to the
applicable Registration Statement until such Holder receives copies of the
supplemented or amended Prospectus contemplated by Section 3(g) and receives
notice that any post-effective amendment has become effective, and in the case
of clause (iii) and (iv) of this paragraph, if so directed by the Company, such
Holder will deliver to the Company all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Shares current at the time of receipt of such notice.
4. EXPENSES.
--------
The Company shall bear all Registration Expenses incurred in connection
with the registration of the Registrable Shares pursuant to this Agreement,
except that each Holder shall be responsible for any brokerage or underwriting
commissions relating and taxes of any kind (including, without limitation,
stamp, transfer, sales and similar taxes) with respect to the sale, disposition
or transfer of Registrable Shares sold by it and for any legal, accounting and
other expenses incurred by it.
5. INDEMNIFICATION BY THE COMPANY.
------------------------------
(a) The Company agrees to indemnify each of the Holders, their respective
officers, directors, employees, agents, representatives and affiliates, each
other Person who participates as an underwriter in the offer or sale of
Registrable Shares, and each Person, if any, that controls a Holder or any such
underwriter within the meaning of the Securities Act against any and all losses,
claims, damages, actions,
<PAGE>
liabilities, costs and expenses (including without limitation reasonable
attorneys' fees, expenses and disbursements documented in writing), joint or
several, to which they may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages, liabilities, (or actions or proceeding
in respect thereof) costs or expenses arise out of or are based upon any untrue
or alleged untrue statement of material fact contained in any Registration
Statement on the effective date thereof or any Prospectus contained therein, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
-------- -------
that the indemnity agreement contained in this Section 5(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company, provided
--------
further that the Company shall not be liable to any Holder, such Holder's
- -------
directors, officers, employees, agents, representatives and affiliates or
participating or controlling Person in any such case to the extent that any such
loss, claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement thereto in reliance upon and in conformity with written
information furnished to the Company for use in connection with the Registration
Statement or the Prospectus contained therein by such Holder, such Holder's
directors, officers, employees, agents, representatives and affiliates or
participating or controlling Person or (ii) such Holder's, such Holder's
directors', officers', employees', agents', representatives' and affiliates' or
participating or controlling Person's failure to send or give a copy of the
final Prospectus furnished to it by the Company at or prior to the time such
action is required by the Securities Act to the Person claiming an untrue
statement or alleged untrue statement or omission or alleged omission if such
statement or omission was corrected in such final prospectus. The obligations of
the Company under this Section 5 shall survive the completion of any offering of
Registrable Shares pursuant to a Registration Statement under this Agreement or
otherwise and shall survive the termination of this Agreement.
(b) Each Holder requesting or joining in any Registration Statement
severally and not jointly shall indemnify and hold harmless the Company, each of
its directors, officers, employees, agents, representatives and affiliates, each
Person, if any, who controls the Company within the meaning of the Securities
Act, and each agent and any underwriter for the Company (within the meaning of
the Securities Act) against any losses, claims, damages or liabilities, costs
and expenses (including without limitation reasonable attorneys' fees, expenses
and disbursements documented in writing), to which the Company or any such
director, officer, employee, agent, representative, affiliate, controlling
Person, agent or underwriter may become subject, under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) costs, or expenses arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in such Registration Statement or any Prospectus contained therein or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, (i) that such untrue statement or alleged untrue statement or omission
or alleged omission was made in such Registration Statement, preliminary or
final prospectus, summary prospectus or amendments or supplements thereto, in
reliance upon and in conformity with written information furnished by or on
behalf of such Holder for use in connection with such Registration Statement or
the Prospectus contained therein or (ii) such Holder's failure to send or give a
copy of the final prospectus furnished to it by the Company at or prior to the
time such action is required by the Securities Act to the Person claiming an
untrue statement or alleged untrue statement or omission if such statement or
omission was corrected in the final prospectus; provided, however, that the
-------- -------
indemnity agreement contained in this Section 5(b) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of such Holder.
(c) Promptly after receipt by an indemnified party under this Section 5 of
notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against any
<PAGE>
indemnifying party under this Section 5, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall have the
right to participate in and assume the defense thereof with counsel selected by
the indemnifying party and reasonably satisfactory to the indemnified party;
provided, however, that an indemnified party shall have the right to retain its
- -------- -------
own counsel, with all fees and expenses thereof to be paid by such indemnified
party, and to be apprised of all progress in any proceeding the defense of which
has been assumed by the indemnifying party; and provided further, that in the
-------- -------
event of a conflict of interest between an indemnifying party and an indemnified
party, an indemnified party shall have the right to retain its own counsel, with
all fees and expenses thereof to be paid by the indemnifying party. The failure
to notify an indemnifying party promptly of the commencement of any such action,
if and to the extent prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 5, but the omission so to notify the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise
than under this Section 5. An indemnifying party shall be entitled to compromise
or settle such action, without the consent of an indemnified party if such
compromise or settlement shall dismiss the action without prejudice and shall
consist solely of monetary payments and such indemnifying party shall make such
payments, or with the consent of an indemnified party in all other cases. An
indemnified party shall not compromise or settle any action without the consent
of an indemnifying party.
(d) To the extent any indemnification by an indemnifying party is
prohibited or limited by law, the indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and indemnified party in connection with the actions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages or
liabilities referred to above shall be deemed to include any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 5(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11 (f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
6. FURNISH INFORMATION: DELIVERY OF PROSPECTUS.
-------------------------------------------
(a) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Agreement that the Holders shall furnish to the
Company such information regarding themselves, the Registrable Shares held by
them, and the intended method of disposition of such securities as the Company
shall reasonably request and as shall be required in connection with the action
to be taken by the Company.
(b) Each of the Holders hereby agrees to deliver or cause delivery of the
Prospectus contained in the applicable Registration Statement to any purchaser
of the shares covered by the Registration Statement from the Holder.
<PAGE>
7. ADDITIONAL SHARES. The Company, at its option, may register, under any
-----------------
Registration Statement and any filings with any state securities commissions
filed pursuant to this Agreement, any number of unissued shares of Common Stock
or any shares of Common Stock owned by any other shareholder or shareholders of
the Company.
8. UNDERWRITING REQUIREMENTS. In connection with any underwritten offering,
-------------------------
the Company shall not be required under Section 2(c) to include Registrable
Shares in such underwritten offering unless the Holders of such Registrable
Shares accept the terms of the underwriting of such offering that have been
reasonably agreed upon between the Company and the underwriters selected by the
Company.
9. NO OTHER OBLIGATION TO REGISTER. Except as otherwise expressly provided in
-------------------------------
this Agreement, the Company shall have no obligation to the Holders to register
the Registrable Shares under the Securities Act.
10. RULE 144 SALES. The Company covenants that it will use all commercially
--------------
reasonable efforts to timely file the reports required to be filed by the
Company under the Securities Act and the Securities Exchange Act of 1934, as
amended, so as to enable the Holders to sell Registrable Shares pursuant to Rule
144 under the Securities Act. In connection with any sale, transfer or other
disposition by a Holder of any Registrable Shares pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with such Holder to facilitate the
timely preparation and delivery of certificates representing the Registrable
Shares to be sold and not bearing any Securities Act legend, and enable
certificates for such Registrable Shares to be for such number of shares and
registered in such names as such Holder may reasonably request at least ten (10)
business days prior to any sale of the Registrable Shares.
11. AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
----------------------
provisions of this sentence, may not be amended, modified, supplemented or
waived, nor may consent to departures therefrom be given, without the written
consent of the Company and the Holders of a majority of the outstanding
Registrable Shares (treating for the purpose of such computation the Holders of
Units as the Holders of Registrable Shares issuable upon exchange of such
Units). Notice of any such amendment, modification, supplement, waiver or
consent adopted in accordance with this Section 11 shall be provided by the
Company to each Holder of Registrable Shares or Units at least thirty (30) days
prior to the effective date of such amendment, modification, supplement, waiver
or consent.
12. NOTICES. All notices and other communications provided for or permitted
-------
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery, (i) if
to a Holder, at such Holder's registered address appearing on the share register
of the Company or the Unit register of the Operating Partnership or (ii) if to
the Company, at 177 Milk Street, Boston, Massachusetts 02109, with a copy to:
Goodwin, Procter & Hoar LLP, Exchange Place, Boston, Massachusetts 02109,
Attention: David P. Ries, P.C.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; or at
the time delivered if delivered by an air courier guaranteeing overnight
delivery.
13. TRANSFER OF REGISTRATION RIGHTS. Except as otherwise provided herein, the
-------------------------------
rights to cause the Company to register the securities granted by the Company
under Section 2 may be assigned or otherwise conveyed to a transferee, assignee
or successor of Registrable Securities, who shall be considered a "Holder" for
purposes of this Agreement; provided that (i) in the case of transfers of Units,
such transfer is in accordance with the provisions of the Partnership Agreement,
(ii) such transfer is effected in accordance with applicable federal and state
securities laws, and (iii) the Company is given written notice by such Holder of
said transfer, stating the
<PAGE>
name and address of said transferee, assignee or successor and identifying the
securities with respect to which such registration rights are being assigned.
14. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of and
----------------------
be binding upon the successors, assigns and transferees of each of the parties,
including, without limitation and without the need for an express assignment,
subsequent Holders. If any successor, assignee or transferee of any Holder
shall acquire Registrable Shares, in any manner, whether by operation of law or
otherwise, such Registrable Shares shall be held subject to all of the terms of
this Agreement, and by taking and holding such Registrable Shares such Person
shall be entitled to receive the benefits hereof and shall be conclusively
deemed to have agreed to be bound by all of the terms and provisions hereof.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement except as expressly provided in this Agreement.
15. COUNTERPARTS. This Agreement may be executed in any number of counterparts
------------
and by the parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
16. GOVERNING LAW. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the Commonwealth of Massachusetts applicable to
contracts made and to be performed wholly within said State.
17. SEVERABILITY. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
18. ENTIRE AGREEMENT. This Agreement is intended by the parties as a final
----------------
expression of their agreement and intended to be the complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein,
with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
COMPANY:
MARYLAND PROPERTY CAPITAL TRUST, INC.
By:_________________________________
Bruce A. Beal, President
HOLDERS:
[SIGNATURE BLOCKS TO COME]
<PAGE>
EXHIBIT 10.5
FORM OF MANAGEMENT AGREEMENT
PROPERTY NAME: Property Capital Trust
Limited Partnership
Located at: 51 New York Avenue
Framingham, Massachusetts
OWNER: Property Capital Trust
Limited Partnership
CONTRACTOR: Beal & Company, Inc.
DATE: ______________, 1999
<PAGE>
FORM OF
MANAGEMENT AGREEMENT
Owner and Contractor act and agree as follows:
PART I
REFERENCE DATA
--------------
Each reference in this Agreement to any of the following defined terms will
be deemed to incorporate all of the following information:
"Commencement Date" __________________, 1999
"Contractor" Beal & Company, Inc., a Massachusetts corporation
"Owner" Property Capital Trust Limited Partnership
"Property" or "Project" Property Capital Trust Limited Partnership
51 New York Avenue
Framingham, Massachusetts
as more particularly described in Exhibit A, together with all personal property
of Owner attached to or used in connection with the above-named property.
Parts II through V of this Agreement and the Exhibits hereto are made a part of
this Agreement as effectively as if set forth above the signature lines.
Executed, as an instrument under seal, as of _________________, 1999.
OWNER:
PROPERTY CAPITAL TRUST LIMITED PARTNERSHIP
By: Property Capital Trust, Inc., its general partner
By: _______________________________________
Name: Bruce A. Beal
Title: President
CONTRACTOR:
BEAL & COMPANY, Inc.
By: _______________________________________
Name:
Title:
<PAGE>
PART II
ENGAGEMENT AND TERM
-------------------
1. Engagement of Contractor. Except as otherwise provided herein, the
------------------------
Owner hereby engages the Contractor as its sole and exclusive management and
leasing agent for the term hereof, to rent, operate, maintain and manage the
Property, together with any expansions thereof and additions thereto and the
Contractor hereby accepts such
2. Term of Agreement. This Agreement shall be for an initial term
-----------------
commencing on the Commencement Date and ending on December 31, 1999.
Thereafter, the term of this Agreement shall be automatically renewed for
successive renewal terms of one (1) year each unless terminated by either party
by written notice delivered to the other party at least thirty (30) days prior
to the expiration of the initial term or then current renewal term, subject to
earlier termination as hereinafter provided. Any and all such renewal terms
shall be upon and subject to all of the same terms and provisions as the initial
term hereof (the initial term and any and all such renewal terms of this
Agreement are hereinafter sometimes referred to as the "Term").
PART III
MANAGEMENT OF THE PROJECT
-------------------------
3. Duties and Authorities of Contractor. Contractor shall manage,
------------------------------------
operate and maintain the Project in an efficient and satisfactory manner,
utilizing trained, experienced personnel, in conformance with an annual budget
(the "Annual Budget") to be prepared by Contractor (in consultation with Owner)
prior to January 10 of each calendar year. The Contractor agrees to perform the
following services, and the Owner hereby authorizes the Contractor, subject to
the terms and provisions of this Agreement, to take such reasonable action as
may be necessary or desirable in connection therewith, to-wit:
(a) Collections. The Contractor shall collect all rents and other
-----------
income from the Project and shall use reasonable efforts to ensure tenants'
compliance with their respective leases, and when necessary, as directed by the
Owner, shall institute any and all legal actions or proceedings (using counsel
approved in writing by Owner) to effect such collections and to evict delinquent
tenants; and Contractor agrees to employ reasonable efforts to attempt to
collect such income, although Contractor shall not be liable for any failure so
to collect;
(b) Bank Accounts; Transfer of Funds. The Contractor shall deposit
--------------------------------
all monies received by Contractor for or on behalf of Owner in a segregated
account in the name of Owner for the Project in a bank or other institution
approved by Owner (the "Depository Account"), which funds shall not be mingled
with the other funds of Contractor. Contractor shall pay out of the Depository
Account all ordinary and necessary operating expenses of the Project and any
other payments relating to the Project required by the terms of this Agreement
or the applicable Annual Budget. Owner may direct Contractor to change any
depository bank or depository arrangement. Without the prior written consent of
Owner, however, Contractor will not change any depository bank or arrangement or
other banking relationship or procedure;
(c) Employees. Contract shall, subject to the provisions of the then
---------
applicable Annual Budget, select, retain and employ qualified and experienced
persons or contractors to perform all necessary maintenance, security (if
requested by Owner or contained in the Annual Budget) and custodial labor in
connection with the Project, whether part time or full time, and shall provide
necessary workman's compensation payments, income tax withholding and other
similar payments, which personnel at all times shall be the employees of
Contractor and shall not be deemed to be the employees of Owner for any purpose
whatsoever. All costs incurred with respect to the foregoing, including without
limitation, all costs and expenses relating to on-site employees, shall be at
Owner's expense provided that such costs are in accordance with the then
applicable Annual Budget or are otherwise approved by Owner. Contractor will
attempt to use independent
2
<PAGE>
contractors where possible and prudent. Contractor shall select, retain and
employ sufficient home office personnel to perform the management activities
required under this Agreement, the costs of which shall be paid by Contractor,
except to the extent otherwise expressly stated herein.
(d) Standard of Care. The Contractor shall exercise diligence and
----------------
care, in accordance with appropriate industry standards, in the management of
the project, and shall furnish the Owner with its advice, experience and
judgment in such management;
(e) Insurance. The Contractor shall maintain insurance coverage
---------
pursuant to Section 8 below.
(f) Payment of Expenses. To the extent that funds of Owner are in
-------------------
accounts of Owner on which Contractor is authorized to draw and available
therefor, the Contractor shall pay from such funds all taxes, assessments, other
impositions applicable to the Project, and all operating expenses of the
Project, including but not limited to the payment of: (i) utility costs; (ii)
on-site personnel costs; (iii) repairs, replacement and maintenance costs; (iv)
security, if desired by the Owner; (v) insurance costs; and (vi) debt service,
if applicable.
(g) Service Contracts. Unless and until the Owner directs Contractor
-----------------
to the contrary, the Contractor, acting for and on behalf of and in the name of
the Owner, shall enter into and supervise the performance of any and all
contracts and agreements which the Contractor may reasonably deem necessary or
desirable to provide any repairs, alterations, maintenance, utilities and other
services to or for the buildings and improvements of the Project, subject to the
approved Annual Budget; provided, however, that Contractor shall not, without
prior written consent of Owner, enter into any one contract or agreement that
requires annual payments in excess of $5,000.00 unless contemplated by the
approved Annual Budget.
(h) Financial Information. Within ten (10) days after the end of each
---------------------
month, the Contractor shall cause to be submitted to the Owner at such place or
places as may be designated by Owner, all accounting and financial information
and services expressly required pursuant to Section 18 below;
(i) Compliance With Laws and Contracts. Contractor will use
----------------------------------
reasonable commercial efforts to comply with federal, state and municipal laws,
ordinances, regulations and orders relative to the leasing, use, operation,
repair and maintenance of the Project and with the regulations of the local
Board of Fire Underwriters or other similar bodies. Contractor will promptly
remedy any violation of any such law, ordinance, rule, regulation or order which
comes to its attention and simultaneously will notify Owner of same. In
addition, expect as otherwise specifically directed by Owner, Contractor will
use reasonable commercial efforts to comply with all contracts and agreements
relating to the Project. In each instance, such compliance will be an expense
of the Project and Contractor will not be required to make any payment from its
own funds or incur any individual liability. Except as otherwise specifically
directed by Owner, Contractor will be responsible for paying, from the income of
the Project, all real estate taxes, personal property taxes, betterment
assessments and similar governmental charges properly due with respect to the
Project;
(j) Utility Contracts. Contractor will maintain, on behalf of Owner
-----------------
and at Owner's expense, contracts for all necessary utility services for the
Project.
(k) Repairs, Decorations and Alterations. Contractor will, at Owner's
------------------------------------
expense, make all ordinary and extraordinary repairs, decorations and
alterations, subject to the limits of the approved Annual Budget.
Notwithstanding anything to the contrary provided herein, the obligation of
Contractor to manage, operate and maintain the Project in accordance with this
Agreement and the Annual Budget shall not except as otherwise expressly provided
in this Agreement, require Contractor to expend its own funds to meet Project
3
<PAGE>
expenses, and Contractor shall not have any liability for any failure to meet
the performance standards in this Agreement and in the Annual Budget to the
extent such failure is due to the unavailability of funds to meet expenses
required to be paid for the project revenue.
4. Compensation to Contractor.
--------------------------
(a) Management Fee. As compensation for the management services to be
--------------
rendered by Contractor hereunder, the Owner agrees to pay to the Contractor a
management fee (the "Management Fee") equal to three percent (3.0%) of the total
monthly gross receipts, from the Project. Payable by the 5th day of the month
for the duration of this Agreement. Payments due Contractor for periods of less
than a calendar month shall be prorated over the number of days for which
compensation is due. The percentage amount set forth in 4(a) shall be based
upon the total gross receipts from the Property during the preceding month.
(b) Leasing Fee. In addition to the Management Fee, the Owner agrees
-----------
to pay Contractor a leasing fee (the "Leasing Fee") in the amounts calculated as
hereinafter set forth for each Tenant Lease entered into during the Term of this
Agreement. The amount of the Leasing Fee will be based upon the annual base
rent payable pursuant to a Tenant Lease. The Leasing Fee shall be due and
payable to Contractor when such Tenant Lease has been executed and delivered by
or on behalf of both the Owner and the Tenant thereunder. The Leasing Fee for
Tenant Leases shall be calculated based on the following schedule:
5% of the annual base rent for the first year of the term;
4% of the annual base rent for the second and third years;
3% of the annual base rent for the fourth year;
2% of the annual base rent for the fifth year; and
1.5% of the annual base rent for any balance of the term up to a
maximum of ten (10) years.
If a Tenant Lease is executed with the participation of an independent
broker to whom a commission is payable, the Leasing Fee payable hereunder with
respect to such Tenant Lease shall equal twenty-five percent (25%) of the
commission payable pursuant to the foregoing schedule.
If an existing Tenant at the Project extends its Tenant Lease pursuant to
an extension right in its existing Tenant Lease (whether or not an amendment to
such Tenant Lease is executed to acknowledge such extension) or if an existing
Tenant at the Project extends its Tenant Lease for an additional term of less
than two years by means of an amendment to such Tenant Lease at a time when such
Tenant has no remaining extension right under the terms of its Tenant Lease, the
Leasing Fee payable hereunder with respect to such extension shall equal fifty
percent of the commission payable pursuant to the foregoing schedule. If an
existing Tenant at the Project extends its Tenant Lease for an additional term
of two years or more by means of an amendment to such Tenant Lease at a time
when such Tenant has no remaining extension rights under the terms of its Tenant
Lease, the full Leasing Fee shall be payable hereunder with respect to such
extension.
Leasing Fees shall be deemed to have been fully earned at the time paid,
except as hereinabove provided, and the Owners' obligation to pay Contractor
said Leasing Fee with respect to any such Tenant Leases shall survive the
expiration or termination of this Agreement.
The Leasing Fees payable hereunder are intended to be gross compensation to
Contractor in consideration for Contractor's leasing and marketing services
hereunder, and Contractor shall therefore not be
4
<PAGE>
entitled to any additional payment hereunder with respect to such services,
except as specifically set forth in this Agreement.
(c) Payment of Fees. The Contractor is hereby authorized to deduct
---------------
any and all fees and reimbursable expenses payable to it under the terms of this
Agreement from rentals and other income received by it on behalf of Owner as
contemplated by this Agreement.
5. Expenses of Operation.
---------------------
(a) Reimbursable Costs. Provided that the same is in accordance with
------------------
the Annual Budget. Owner will, at its own cost and expense, in addition to
payment of and for the on-site management personnel as set forth in Paragraph
3(c) hereof and any other reimbursable expenses provided for in this Agreement,
pay or reimburse the Contractor for the following expenses of operation, which
shall not be borne by Contractor:
(i) Fees and expenses of independent auditors and accountants,
and reasonable fees of outside legal counsel.
(ii) Advertising, promotional, public relations, brochures and
printing fees, costs and expenses.
(iii) Costs of preparation, reproduction, transportation and
storage of display boards, layouts and similar items used
or needed by Contractor to negotiate Tenant Leases.
(iv) Any fees or commissions payable to independent brokers for
leasing any space situated in the Project or any part
thereof.
(v) Reasonable Federal Express, UPS or other overnight courier
charges incurred by Contractor in connection with
performance of its duties hereunder.
(vi) Costs of data processing.
PART IV
LEASING OF THE PROJECT
----------------------
6. Leasing Services. With respect to the leasing of space in the
----------------
Project, Contractor agrees to furnish leasing and marketing services throughout
the Term as aforesaid, including without limitation the negotiation of all
Tenant Leases (as defined below). All such Tenant Leases shall be on a standard
form approved by Owner, in the name of Owner, and executed by Owner. Upon the
execution by all parties of any Tenant Lease, Contractor shall immediately
provide to Owner a copy of the executed Tenant Lease.
7. Leasing Definitions. For purposes of this Agreement, the Owner and
-------------------
Contractor agree that (i) the term "Tenant Leases" shall mean and refer to any
and all existing leases and any and all future leases and other agreements for
the lease or occupancy of any space in the Project which are entered into during
the term of this Agreement, and any and all amendments thereto and modifications
thereof; (ii) the term "Tenant Lease" shall mean and refer to any one of the
Tenant Leases; (iii) the term "Tenants" shall mean and refer to any and all
tenants of any space in the Project; (iv) the term "Tenant" shall mean and refer
to any one of the Tenants.
5
<PAGE>
PART V
GENERAL PROVISIONS
------------------
8. Insurance.
---------
(a) Owner's Insurance. At Owner's election, Contractor will on behalf
-----------------
of Owner and at Owner's expense (i) obtain and will keep in full force and
effect during the Term, adequate property and liability insurance with respect
to the Project, but in no event less that (x) in the case of property insurance,
the full insurable value of the improvements at the Project together with loss
of rents or business interruption coverage and (y) in the case of liability
insurance, the amounts specified by Owner, and (ii) comply with all requirements
affecting the insurance provisions included in any mortgages, if applicable,
encumbering the Project. All of said insurance shall be written on an
occurrence basis and shall be maintained in full force and effect during the
Term. All of said liability insurance required hereunder, or otherwise
maintained by Owner with respect to the Project, shall name the Owner, the
Contractor and any of Owner's mortgagees, if applicable, as named insured
thereunder and shall be primary to any other coverage which may be in effect.
Contractor is hereby authorized to procure all of said insurance on behalf of
the Owner. Notwithstanding the foregoing, at Owner's election such property and
liability insurance maybe blanketed with other insurance carried by Owner or any
affiliate of Owner, in which case a pro rata share of the premiums will be
chargeable to the Project as an operating expense. Owner or Owner's insurer will
have the exclusive right, at its option (chargeable as an operating expense of
the Project), to conduct the defense of any claim, demand or suite arising out
of the ownership, operation or management of the Project. Contractor will
furnish whatever information is requested by Owner for the purpose of placement
of insurance coverages and will aid and cooperate in every reasonable way with
respect to such insurance and any claim or loss thereunder. Contractor will
notify Owner and Owner's insurance carrier promptly upon becoming aware of any
casualty, loss, injury, claim or other event which may result in a claim under
any insurance policy maintained by Owner.
(b) Adverse Impacts on Insurance. Contractor shall not knowingly
----------------------------
permit the use of the Project for any purpose which might (i) void any policy of
insurance relating to the Project, (ii) render any loss thereunder
uncollectable, or (iii) increase the premium otherwise payable thereunder except
in connection with prudent actions designed to increase the economic benefits
from the Project.
9. Indemnity.
---------
(a) Owner's Indemnity of Contractor. The Contractor shall perform its
-------------------------------
obligations and duties under this Agreement as an independent contractor of the
Owner, and any and all obligations incurred by the Contractor on behalf of Owner
hereunder as expressly provided herein shall be for the account and at the
expense of Owner to the extent provided herein. As a material part of the
consideration for this Agreement, and as an inducement for the Contractor to
enter into this Agreement, the Owner agrees that, to the fullest extent
permitted by law, the Owner has indemnified and does hereby indemnify and hold
harmless the Contractor, its officers, directors, agents, servants, and
employees, from and against any and all liability, claims of liability, suits,
actions, judgments, damages, losses, costs and expenses, including but not
limited to costs of defense and reasonable attorneys' fees, paid or incurred by
Contractor or by any of its officers, directors, agents, servants or employees,
arising from or as the result of the performance by Contractor of its
obligations and agreements hereunder in accordance with the terms and provisions
hereof, or arising out of or as the result of any bodily or personal injury to
or death of any person or persons whomsoever (including but not limited to any
agent, servant or employee of Owner or Contractor, or of any of their respective
contractors or subcontractors, or any lessee, tenant, licensee, guest, invitee
or any other person who enters upon the Project), or any loss, theft or
destruction of or damage to any property of the Owner or of others, arising out
of or in connection with the ownership of the Project by Owner or the operation,
leasing or management of the Project by the Contractor, or the exercise of any
of the duties, obligations or powers herein or hereafter granted to, or
conferred upon or assumed by Contractor, or liability therefor imputed as a
matter of law to the Contractor or any of its officers, directors, agents,
servants or employees.
6
<PAGE>
Notwithstanding the provisions of the foregoing paragraph, Owner shall not
be required to indemnify, defend or hold the Contractor harmless against any
loss, cost, liability or expense which arises as a result (i) of any gross
negligence or willful misconduct on the part of the Contractor or its home
office employees, (ii) any breach or default by Contractor hereunder which
remains uncured following notice thereof from Owner and the expiration of any
applicable cure periods.
(b) Contractor's Indemnity of Owner. The Contractor agrees to
-------------------------------
indemnify, defend (with counsel reasonably approved by Owner) and hold harmless
Owner from any loss, cost, liability or expense (including without limitation
reasonable attorneys' fees) which arises as a result of any gross negligence or
willful misconduct on the part of the Contractor, its agents or employees. The
foregoing shall not be construed as a limitation upon any other rights or
remedies provided at law for a breach of this Agreement by Contractor continuing
beyond any notice or cure period. Notwithstanding anything to the contrary
provided herein, the Contractor shall not have any liability for any loss, cost,
liability or expense paid or incurred by Owner which is paid or reimbursed by
any casualty, loss of rents, business interruptions, liability or other
insurance maintained by or on behalf of the Project.
(c) Survival of Indemnities. Owner and Contractor agree that the
-----------------------
indemnities set forth above shall survive the expiration or termination (whether
with or without cause) of this Agreement.
10. Termination of Agreement.
------------------------
(a) Termination of Owner. The Owner shall have the right to terminate
--------------------
this Agreement with or without cause by giving Contractor at least thirty (30)
days prior written notice and, in such event, Contractor shall be entitled to
receive all fees and reimbursable expenses payable to Contractor hereunder as
provided in clause (c) below. In the event of termination by Owner with cause,
Owner shall have such rights land remedies against Contractor as provided under
applicable law.
(b) Termination by Contractor. The Contractor shall have the right to
-------------------------
terminate this Agreement at any time with or without cause by written notice
delivered to the Owner at least sixty (60) days prior to the effective date of
such termination. In the event of termination by Contractor, all fees and
reimbursable expenses payable to Contractor hereunder shall be paid as set forth
in clause (c) below.
(c) Termination Payments. Upon termination of this Agreement by
--------------------
either party (or by the Lender pursuant to clause (d) below), the Management Fee
shall be prorated to the effective date of such termination and paid to
Contractor. In addition, termination shall not affect or impair the Owner's
obligation to pay Contractor any Leasing Fees, reimbursable expenses and other
sums due and payable by Owner to Contractor to which the Contractor is entitle
hereunder, all of which shall be and remain due and payable in full in
accordance with the terms and provisions of this Agreement.
11. Notices. Any notices respecting provisions of this Agreement shall be
-------
in writing and shall be considered to have been given if hand delivered or if
sent by registered or certified mail, return receipt requested, or by private
overnight carrier, in each instance properly addressed and with postage or other
charges prepaid, in the case of the Owner to ("Owner's Notice Address"):
177 Milk Street
Boston, Massachusetts 02109
and in the case of the Contractor to ("Contractor's Notice Address"):
177 Milk Street
Boston, Massachusetts 02109
7
<PAGE>
All notices shall be considered to have been given on the earlier of receipt or
three days after the date of mailing or delivery to an overnight carrier as
provided herein. Any party to this Agreement desiring to make a change in its
address for the purpose of notices under this Section shall notify the other
party of the change of address in the same manner as provided for in this
Section for notices.
12. Binding Effect. The provisions hereof shall be binding upon and inure
--------------
to the benefit of the parties hereto, their respective heirs, personal
representatives, successors and assigns.
13. Gender and Number. As used in this Agreement, words of any gender
-----------------
shall be construed to include any other gender, words in the singular number
shall be construed to include the plural, and words in the plural number shall
be construed to include the singular, when the context or sense of this
Agreement requires.
14. Severability. If any provision or any part of any provision of this
------------
Agreement or the application thereof to any person or circumstances shall be
held illegal, invalid or unenforceable to any extent by any court of competent
jurisdiction, such hold shall not affect the remaining provisions or parts of
provisions of this Agreement or the application thereof to any other persons or
circumstances, and all of the provisions of this Agreement shall be enforced to
the fullest extent permitted by law.
15. Governing Law. This Agreement shall construed in accordance with the
-------------
laws of The Commonwealth of Massachusetts.
16. Paragraph Headings. All captions and paragraph headings contained in
------------------
this Agreement are for convenience of reference only, and shall not be construed
to enlarge, diminish or otherwise affect the meaning or interpretation of any of
the terms or provisions hereof.
17. Independent Contractor. This Agreement is not one of general agency
----------------------
by Contractor for Owner, but one with Contractor engaged independently in the
business of managing properties, as an independent contractor, and in that
respect having only limited agency as specifically set forth in this Agreement.
18. Accounting and Financial Services.
---------------------------------
(a) Books and Accounts. Contractor will maintain adequate and
------------------
separate books and records for the Project, the entries on which shall be
supported by sufficient documentation to ascertain that all entries are
accurate. Such books and records will be maintained at Contractor's Notice
Address or at such other location as may be mutually agreed upon by Contractor
and Owner in writing. Contractor will attempt in good faith to maintain such
control over accounting and financial transaction as is reasonably required to
protect Owner's assets from theft, negligence or fraudulent activity on the part
of Contractor's employees or other agents. Uninsured losses arising from theft,
gross negligence or fraud by Contractor are to be borne by Contractor in its
individual capacity and not as an operating expense of the Project.
(b) Monthly Statements - Financial Reports. Contractor will furnish
--------------------------------------
to Owner, no later than 10 days after the end of each month, a report (the
"Monthly Statement") of all transaction occurring during such month. The purpose
of said Monthly Statement will be to inform and appraise Owner of Project status
and condition. Contractor is responsible to review and comment on Project
financial and physical condition to assist Owner so that Owner is fully
knowledgeable regarding same.
(c) Owner's Property. All books, records, computer disks, invoices
----------------
and other documents received and/or maintained by Contractor pursuant to this
Agreement are and will remain the property of Owner.
19. Subordination. This Agreement, if applicable, is subject and
-------------
subordinate in all respects and inferior to any and all mortgages, security
agreements, assignments of leases, rights of first offer, or UCC
8
<PAGE>
financing statements affecting or encumbering the Project and held by and entity
unrelated to Owner, as well as to any modification, increase, amendment or
consolidation thereto, as the case may be.
20. No Assignment; Further Assurances. This Agreement and all rights
---------------------------------
hereunder are not assignable by Contractor or by Owner.
21. Consent and Approvals. Owner's consents or approvals may be given
---------------------
only in writing or by facsimile of a written consent or approval transmitted by
telecopy or other electronic means, and only by representatives of Owner from
time to time designated in writing by Owner.
22. Amendments. This Agreement cannot be amended or modified except by
----------
written instrument signed by both Owner and Contractor.
23. Complete Agreement. This Agreement supersedes any previous
------------------
management, leasing or consulting agreement between the parties relating to the
Property.
24. Exculpation. Contractor agrees that Contractor shall look solely to
-----------
Owner's interest in the Project for the satisfaction of any claim now existing
or hereafter arising or accruing against Owner, its trustees, beneficiaries,
officers, agents and employees. It is expressly agreed that neither Owner, any
partner of Owner, nor any partner, officer, director, shareholder, trustee,
beneficiary, employee, agent or representative of any of them, shall in any way
be held personally liable hereunder.
9
<PAGE>
EXHIBIT A
---------
The land in the Framingham Industrial Park, Framingham, Middlesex County,
Massachusetts, situated on the northerly side of New York Avenue, and bounded
and described as follows:
NORTHERLY by land of Paramount Development Associates, Inc., two
hundred forty-seven and 73/100 (247.73) feet;
EASTERLY by land of Electric Product Sales, Inc. one hundred ninety-
seven and 02/100 (197.02) feet;
SOUTHERLY by New York Avenue (a private way) two hundred fifty-five
and 13/100 (255.13) feet;
WESTERLY by land of Paramount Development Associates, Inc. one
hundred ninety-seven and 15/100 (197.15) feet.
Containing approximately 49,535 square feet all as more fully shown on Lot #24
on plan entitled "Plan of Land in Framingham, Mass. Owned by: Paramount
Development Associates, Inc." Scale 1"=40' dated Sept. 17, 1968. Plan by:
MacCarthy Engineering Service, Inc. Natick, Mass. recorded with Middlesex South
District Registry of Deeds, Book 11613, Page 494.
10
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use, in this
registration statement on FormS-4, of our report dated July 8, 1998 for
Framingham York Associates Limited Partnership as of December 31, 1997, 1996
and 1995 and for each of the three years in the period ended December 31, 1997,
included herein and to all references to our Firm included in this registration
statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
November 20, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Maryland Property
Capital Trust, Inc. for the registration of 159,737 shares of its common stock
and to the incorporation by reference therein of our report dated January 23,
1998, with respect to the financial statements and schedules of Property
Capital Trust included in its Annual Report (Form 10-K) for the year ended
December 31, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
Boston, Massachusetts
November 19, 1998
